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Credit Risk Models and Agricultural Lending

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  • Ani L. Katchova
  • Peter J. Barry

Abstract

Credit risk models are developed and used to estimate capital requirements for agricultural lenders under the New Basel Capital Accord. The study uses credit value-at-risk methods to calculate probability of default, loss given default, and expected and unexpected losses. Two applied models, CreditMetrics and Moody's KMV, are estimated using farm financial data. The results show that the necessary capital for agricultural lenders under the New Basel Accord varies substantially depending on the riskiness and granularity of the portfolio. Copyright 2005, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.0002-9092.2005.00711.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 87 (2005)
Issue (Month): 1 ()
Pages: 194-205

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Handle: RePEc:oup:ajagec:v:87:y:2005:i:1:p:194-205

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Cited by:
  1. Pederson, Glenn D. & Chu, Yu-Szu & Richardson, D. Wynn, 2011. "Community Bank Assessment of Agricultural Portfolio Risk Exposure: The Literature and the Methods in Use," Staff Papers 107483, University of Minnesota, Department of Applied Economics.
  2. Jan Fałkowski & Pavel Ciaian & d'Artis Kancs, 2009. "Access to Credit, Factor Allocation and Farm Productivity: Evidence From the CEE Transition Economies," Working Papers 2009-12, Faculty of Economic Sciences, University of Warsaw.
  3. Durguner, Seda & Barry, Peter J. & Katchova, Ani L., 2006. "Credit Scoring Models: A Comparison between Crop and Livestock Farms," 2006 Annual meeting, July 23-26, Long Beach, CA 21431, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Jouault, Amelie & Featherstone, Allen M., 2006. "Determining the Probability of Default of Agricultural Loans in a French Bank," 2006 Annual meeting, July 23-26, Long Beach, CA 21376, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Benjamin, Olatunbosun, 2012. "Improving credit allocation to sustainable agriculture in Sub-Saharan Africa: Review of bio-based economy benefits," MPRA Paper 41313, University Library of Munich, Germany.
  6. Zhang, Tianwei & Ellinger, Paul N., 2006. "Credit Risk and Financial Performance Assessment of Illinois Farmers: A Comparison of Approaches with Farm Accounting Data," 2006 Annual meeting, July 23-26, Long Beach, CA 21384, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Collier, Benjamin & Katchova, Ani L. & Skees, Jerry R., 2010. "Loan Portfolio Performance and El Niño, an Intervention Analysis," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56217, Southern Agricultural Economics Association.
  8. Harris, James Michael & Blank, Steven C. & Erickson, Kenneth W. & Hallahan, Charles B., 2010. "Off-farm Income and Investments in Farm Assets: A Double Hurdle Approach," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61531, Agricultural and Applied Economics Association.
  9. Katchova, Ani L. & Nam, Sangjeong, 2005. "Credit Risk Migration Analysis Focused on Farm Business Characteristics and Business Cycles," 2005 Annual meeting, July 24-27, Providence, RI 19451, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Odeh, Oluwarotimi O. & Featherstone, Allen M. & Sanjoy, Das, 2006. "Predicting Credit Default in an Agricultural Bank: Methods and Issues," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35359, Southern Agricultural Economics Association.
  11. Bandyopadhyay, Arindam, 2007. "Credit Risk Models for Managing Bank’s Agricultural Loan Portfolio," MPRA Paper 5358, University Library of Munich, Germany.
  12. Dressler, Jonathan B. & Stokes, Jeffrey R., 2006. "Mortgage Termination at AgChoice Farm Credit," Proceedings: 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006; Washington, DC 133077, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  13. Harris, James Michael & Dillard, John & Erickson, Kenneth W. & Hallahan, Charles B., 2009. "Changes in Debt Patterns and Financial Structure of Farm Businesses: A Double Hurdle Approach," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49402, Agricultural and Applied Economics Association.

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