THE ROLE OF RISK MANAGEMENT IN PROJECT FINANCING IN THE BANKING SECTOR OF UZBEKISTAN: A MONTE CARLO SIMULATION-BASED STATISTICAL ANALYSIS
DOI:
https://doi.org/10.55640/Keywords:
Project finance; Risk management; Monte Carlo simulation; Banking sector of Uzbekistan; Financial modeling; Exchange rate risk; NPV volatility; Basel principles.Abstract
Project financing is a strategic financial instrument supporting infrastructure and industrial development in emerging economies. In Uzbekistan, banking sector reforms have expanded long-term investment activities; however, project financing remains highly exposed to macroeconomic and financial risks. This study investigates the role of risk management in project financing in Uzbekistan’s banking sector using a Monte Carlo simulation framework. A stochastic model incorporating exchange rate volatility, inflation dynamics, interest rate variability, and operational risk parameters was developed. Based on 10,000 simulation iterations, the findings indicate that currency risk represents the most influential determinant of negative Net Present Value (NPV) outcomes. The results confirm that deterministic risk assessment models underestimate downside risk by approximately 18%. The study recommends integrating advanced stochastic modeling into banking risk management systems to enhance financial sustainability and regulatory compliance.
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