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An Analysis of Default and Liquidity Risk in Farm Credit System Bonds

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Author Info
Jensen, Farrell E.
Perry, Christoffer K.
Abstract

This study tests for the existence of default and liquidity risk premiums in Farm Credit System bonds. ARCH models are used with over eight years of daily data on yields to maturity of Farm Credit System bonds and U.S. Treasury bonds. Matching five-year maturities for both types of bonds were used. Out data contain evidence of both default and liquidity risk in the spread between the two securities. Elasticity estimates show that the yield spreads are more responsive to default risk than liquidity risk. These sources of risk likely increase the rates agricultural borrowers must pay for loans from the Farm Credit System.

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File URL: http://purl.umn.edu/8600
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Publisher Info
Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 32 (2007)
Issue (Month): 01 (April)
Pages:
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Handle: RePEc:ags:jlaare:8600

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Web page: http://waeaonline.org/
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Related research
Keywords: ARCH model; default risk; Farm Credit System bonds; liquidity risk; yield spreads; Agricultural Finance;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Stam, Jerome M. & Dixon, Bruce L., 2004. "Farmer Bankruptcies And Farm Exits In The United States, 1899-2002," Agricultural Information Bulletins 33689, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  2. Smith, Aaron, 2004. "Level Shifts and the Illusion of Long Memory in Economic Time Series," Working Papers 11974, University of California, Davis, Department of Agricultural and Resource Economics. [Downloadable!]
    Other versions:
  3. Mardi Dungey & Renee Fry & Vance Martin & Brenda González-Hermosillo, 2002. "International Contagion Effects from the Russian Crisis and the LTCM Near-Collapse," IMF Working Papers 02/74, International Monetary Fund. [Downloadable!]
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This page was last updated on 2009-12-26.

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