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Valuation of Credit Risk in Agricultural Mortgages

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  • Bruce J. Sherrick
  • Peter J. Barry
  • Paul N. Ellinger

Abstract

A credit-risk valuation model is developed and empirically implemented to estimate the cost of insuring against credit risks in pools of agricultural mortgage loans. Probabilistic information about loss distributions across a broad set of loan-level and pool-level characteristics is used to assess insurance valuation and solvency likelihood. The effects on the value of credit-risk insurance of pool size, deductibles, timing alterations, premium loadings, adverse loan selection, and changing underwriting standards are also estimated. Results indicate that actuarial insurance costs are initially highly sensitive and then become relatively insensitive as pool size increases. Copyright 2000, Oxford University Press.

Suggested Citation

  • Bruce J. Sherrick & Peter J. Barry & Paul N. Ellinger, 2000. "Valuation of Credit Risk in Agricultural Mortgages," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 71-81.
    • Handle: RePEc:oup:ajagec:v:82:y:2000:i:1:p:71-81
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00007
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    Cited by:

    1. Jonathan B. Dressler & Jeffrey R. Stokes, 2010. "Survival analysis and mortgage termination at AgChoice ACA," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(1), pages 21-36, May.

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