IDEAS home Printed from https://ideas.repec.org/p/ags/aare00/123607.html
   My bibliography  Save this paper

Pricing farm loans for credit risk

Author

Listed:
  • Bramma, Keith M.

Abstract

This article analyses the risk-return efficiency of limits to which loan pricing accounts for credit risk in the Australian-farm sector. A key issue faced by banks is the trade-off between raising returns through higher risk premiums and the possibility of impairing credit quality. The simulation results suggest that the stochastic efficiency of the size of risk-pricing limits is positively related to volatility of farm income when dynamic relationships are considered. This finding implies that Australian banks should price further across the credit-risk spectrum to farm businesses with relatively volatile incomes compared to those with stable incomes.

Suggested Citation

  • Bramma, Keith M., 2000. "Pricing farm loans for credit risk," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123607, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare00:123607
    DOI: 10.22004/ag.econ.123607
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/123607/files/Bramma.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.123607?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bramma, Keith M. & Batterham, Robert L., 1994. "Linking Farm Risk to Institutional Credit Risk," 1994 Conference (38th), February 8-10, 1994, Wellington, New Zealand 148074, Australian Agricultural and Resource Economics Society.
    2. Anderson, Jock R. & Dillon, John L. & Hardaker, Brian, 1977. "Agricultural Decision Analysis," Monographs: Applied Economics, AgEcon Search, number 288652, July.
    3. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    4. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(3), pages 335-346.
    5. Lawrence, Edward C & Arshadi, Nasser, 1995. "A Multinomial Logit Analysis of Problem Loan Resolution Choices in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 202-216, February.
    6. Barry, Peter J. & Ellinger, Paul N., 1989. "Credit Scoring, Loan Pricing, And Farm Business Performance," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-11, July.
    7. Pederson, Glenn & Boehlje, Michael & Doye, Damona G. & Jolly, Robert W., 1987. "Resolving Financial Stress in Agriculture by Altering Loan Terms: Impacts on Farmers and Lenders," Staff General Research Papers Archive 11374, Iowa State University, Department of Economics.
    8. Stephen C. Gabriel & C. B. Baker, 1980. "Concepts of Business and Financial Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 560-564.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Moss, Charles B. & Ford, Stephen A. & Castejon, Mario, 1991. "Effect of Debt Position on the Choice of Marketing Strategies for Florida Orange Growers: A Risk Efficiency Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 23(2), pages 103-112, December.
    2. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Documentos de Trabajo del ICAE 2013-31, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico, revised Aug 2013.
    3. Heller, Yuval & Schreiber, Amnon, 2020. "Short-term investments and indices of risk," Theoretical Economics, Econometric Society, vol. 15(3), July.
    4. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2015. "Preferences of risk-averse and risk-seeking investors for oil spot and futures before, during and after the Global Financial Crisis," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 204-216.
    5. Lien, Gudbrand, 2002. "Non-parametric estimation of decision makers' risk aversion," Agricultural Economics, Blackwell, vol. 27(1), pages 75-83, May.
    6. Gempesaw, Conrado M., II & Tambe, A.M. & Nayga, Rodolfo M., Jr. & Toensmeyer, Ulrich C., 1988. "The Single Index Market Model In Agriculture," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(2), pages 1-9, October.
    7. Doron Nisani, 2023. "On the General Deviation Measure and the Gini coefficient," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(3), pages 599-610, September.
    8. Wong, Wing-Keung & Phoon, Kok Fai & Lean, Hooi Hooi, 2008. "Stochastic dominance analysis of Asian hedge funds," Pacific-Basin Finance Journal, Elsevier, vol. 16(3), pages 204-223, June.
    9. Lean, Hooi Hooi & McAleer, Michael & Wong, Wing-Keung, 2010. "Market efficiency of oil spot and futures: A mean-variance and stochastic dominance approach," Energy Economics, Elsevier, vol. 32(5), pages 979-986, September.
    10. Anderson, Jock R., 1983. "On Risk Deductions In Public Project Appraisal," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(3), pages 1-9, December.
    11. Doron Nisani, 2019. "Ranking Investments Using the Lorenz Curve," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(1), pages 1-9, March.
    12. Yudhvir Seetharam, 2013. "Do Mutual Funds Attract the Right Investor? A Stochastic Dominance Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 5(12), pages 905-914.
    13. Zylstra, Michael J. & Kilmer, Richard L. & Uryasev, Stanislav, 2003. "Risk Balancing Strategies In The Florida Dairy Industry: An Application Of Conditional Value At Risk," 2003 Annual meeting, July 27-30, Montreal, Canada 22021, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Sheng-Ping Yang & Thanh Nguyen, 2019. "Skewness Preference and Asset Pricing: Evidence from the Japanese Stock Market," JRFM, MDPI, vol. 12(3), pages 1-10, September.
    15. Schumann, Keith D. & Richardson, James W. & Lien, Gudbrand D. & Hardaker, J. Brian, 2004. "Stochastic Efficiency Analysis Using Multiple Utility Functions," 2004 Annual meeting, August 1-4, Denver, CO 19957, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Dominic Gasbarro & Wing-Keung Wong & J. Kenton Zumwalt, 2007. "Stochastic Dominance Analysis of iShares," The European Journal of Finance, Taylor & Francis Journals, vol. 13(1), pages 89-101.
    17. Hooi Hooi Lean & Michael McAleer & Wing-Keung Wong, 2010. "Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach," CIRJE F-Series CIRJE-F-705, CIRJE, Faculty of Economics, University of Tokyo.
    18. Lean, H.H. & McAleer, M.J. & Wong, W.-K., 2010. "Investor preferences for oil spot and futures based on mean-variance and stochastic dominance," Econometric Institute Research Papers EI 2010-37, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    19. Pannell, David J., 1988. "Modelling Risk in Linear Programming Using Direct Solution of Linearly Segmented Approximations of the Utility Function," Discussion Papers 315423, University of Western Australia, School of Agricultural and Resource Economics.
    20. repec:wvu:wpaper:10-08 is not listed on IDEAS
    21. Haim Levy & Enrico G. De Giorgi & Thorsten Hens, 2012. "Two Paradigms and Nobel Prizes in Economics: a Contradiction or Coexistence?," European Financial Management, European Financial Management Association, vol. 18(2), pages 163-182, March.

    More about this item

    Keywords

    Agricultural Finance; Risk and Uncertainty;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aare00:123607. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.