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Credit Risk Migration Patterns of Agricultural Loans

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  • Behrens, Andrew
  • Pederson, Glenn D.

Abstract

This study utilizes comparisons and Probit regression analysis to determine the influence of previous migrations and other variables on the likelihood of future migrations of agricultural loan credit risk. The Farm Credit System association data set contains a large number of lender risk-rated agricultural loans. The lender risk ratings used are less likely to migrate than ratings based on credit score proxies. The results indicate that the direction of previous migrations significantly influences future migrations in a trendreversal pattern. Forecasting future migrations remains difficult even though the marginal effect of a previous migration on the likelihood of a future migration is quite large.

Suggested Citation

  • Behrens, Andrew & Pederson, Glenn D., 2005. "Credit Risk Migration Patterns of Agricultural Loans," 2005 Agricultural and Rural Finance Markets in Transition, October 3-4, 2005, Minneapolis, Minnesota 132739, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    • Handle: RePEc:ags:nc2005:132739
    DOI: 10.22004/ag.econ.132739
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    References listed on IDEAS

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    1. Jill M. Phillips & Ani L. Katchova, 2004. "Credit score migration analysis of farm businesses: conditioning on business cycles and migration trends," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 64(1), pages 1-15, May.
    2. Escalante, Cesar L. & Park, Timothy A. & Barry, Peter J. & Demir, Ebru, 2002. "Determinants Of Farm Credit Migration Rates," 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado 132368, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    3. Lando, David & Skodeberg, Torben M., 2002. "Analyzing rating transitions and rating drift with continuous observations," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 423-444, March.
    4. Christensen, Jens H.E. & Hansen, Ernst & Lando, David, 2004. "Confidence sets for continuous-time rating transition probabilities," Journal of Banking & Finance, Elsevier, vol. 28(11), pages 2575-2602, November.
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    Keywords

    Agricultural Finance;

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