Download This PaperProject Finance Collateralised Debt Obligations: An Empirical Analysis of Spread Determinants
20 Pages Posted: 20 Oct 2012
Date Written: November 2012
Abstract
Credit rating is the most important variable in determining tranche spread at issue on collateralised debt obligations (CDOs) issues backed by project finance (PF) loans. Factors that are important for pricing in the case of corporate bonds, such as market liquidity and weighted average maturity, are also relevant for determining spreads for these securities. Furthermore, the nature of the underlying assets has a substantial impact on CDO pricing: Primary market spread is significantly higher when the underlying PF loans bear a higher level of market risk and when the proportion of projects still under construction in the securitised portfolio is larger.
Keywords: collateralised debt obligations, project finance
JEL Classification: G12, G15
Suggested Citation: Suggested Citation
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