Rethinking highway finance: A data-driven pricing model for concession securities in chongqing, China

Hao Lu, Dingyi Liu, Chengyou Xiao, Cheng Zhang and Xiaosen Du

Finance Research Letters, 2024, vol. 68, issue C

Abstract: Under the background of local governments no longer guaranteeing minimum traffic volumes after 2020 in China, how to price the highway concessions securities has become an urgent problem that needs to be solved. This paper develops a novel pricing model for highway concession securities in Chongqing, China, post-2020, using ARIMA-EGARCH, Nelson-Siegel, and DCF models on 754,416 toll records. The main results are as follows: China's new budget law can influence the financing effect of highway securitization. The ratio of priority bonds would be overestimated, and the default probability would increase under the normal distribution hypothesis. In addition, the financing capacity of pool issuance securitization is better than the respective issuance. Our findings indicate that pooled issuance securitization enhances financing capacity more effectively than individual issuances. Legislative adjustments significantly influence the effectiveness of highway securitization, highlighting the need for a data-driven approach to account for traffic volume risks.

Keywords: Highway concessions securities; Securitized project finance; Autoregressive integrated moving average; Asset pricing; Data-driving (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:68:y:2024:i:c:s1544612324010195

DOI: 10.1016/j.frl.2024.105989

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