Infrastructure financing with project bond and credit default swap under public-private partnerships

This paper elaborates the use of project bonds and a credit default swap (CDS) in infrastructure financing under public-private partnerships (PPPs). First, a structural model is presented and calibrated using market data to estimate the default probability of a project company in a PPP project, which lays the foundation for determining the CDS premium. Second, the CDS is priced using the risk-neutral valuation method. Third, sensitivity analysis...