Abstract
Asset-backed securitization will greatly promote the sustainability of infrastructure construction and financing. However, there are quite limited researches conducted in this field. Given the project characteristics of infrastructure project securities, this paper proposes the issuance steps of redeemable asset-backed notes (ABN) based on the infrastructure project’s usufruct as the basic asset. Taking the expressway franchise as an example, the issuing scale and coupon rate of the redeemable ABN are determined by the expected cash flow of the expressway, the term structure of random interest rates, and the option-adjusted spread (OAS). In addition, this research analyzes the duration, convexity, and OAS.
Highlights
The characteristics of infrastructure projects are low risk, stable returns, and steady operation of the main body
Taking the pricing of asset securitization of expressway usufruct as an example, this paper draws on the pricing method of securitization products which are similar to the asset-backed notes (ABN) structure
The innovations of this research are two-fold: (1) By combining the Kalman filtering method with the two-factor Vasicek model to simulate the term structure of stochastic interest rates, as well as by calculating the option-adjusted spread (OAS), proposing the pricing steps of redeemable ABN, and carrying out the empirical simulation, this paper enriches the pricing theory of asset securitization products and provides a theoretical basis for determining reasonable prices when ABN products are traded in Real Estate Investment Trusts (REITs) in the future; (2) By designing redeemable assetbacked securitization products with infrastructure income rights, this research proposes a more flexible long-term and sustainable financing method for infrastructure services
Summary
The characteristics of infrastructure projects are low risk, stable returns, and steady operation of the main body. Taking the pricing of asset securitization of expressway usufruct as an example, this paper draws on the pricing method of securitization products which are similar to the ABN structure It combines the specific characteristics of the expressway usufruct asset pool and uses the option-adjusted spread method to design a redeemable ABN pricing model. The innovations of this research are two-fold: (1) By combining the Kalman filtering method with the two-factor Vasicek model to simulate the term structure of stochastic interest rates, as well as by calculating the OAS, proposing the pricing steps of redeemable ABN, and carrying out the empirical simulation, this paper enriches the pricing theory of asset securitization products and provides a theoretical basis for determining reasonable prices when ABN products are traded in REITs in the future; (2) By designing redeemable assetbacked securitization products with infrastructure income rights, this research proposes a more flexible long-term and sustainable financing method for infrastructure services
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