%0 Journal Article %A Michel Gendron %A Van Son Lai %A Issouf Soumaré %T Project Finance with Limited Recourse %B An Option Pricing Approach to Debt Capacity and Project Risk %D 2007 %R 10.3905/jsf.2007.698660 %J The Journal of Structured Finance %P 97-104 %V 13 %N 3 %X Project finance has become an important method for financing large-scale, capital-intensive projects, such as power plants, oil pipelines, roads, tunnels, etc. We analyze debt capacity and risk choice in a project finance arrangement where the project's lenders have limited recourse to the sponsoring company's assets. We draw a parallel between vulnerable financial guarantee loans and project finance loans with limited recourse. Using contingent claims analysis, we illustrate the trade-offs between risk and debt capacity in those cases where the project's lenders have recourse to the sponsor's assets and in those where they do not.TOPICS: Credit risk management, project finance, volatility measures %U https://jsf.pm-research.com/content/iijstrfin/13/3/97.full.pdf