VALUING AGRICULTURAL MORTGAGE-BACKED SECURITIES

Jeffrey Stokes and Brian M. Brinch

Journal of Agricultural and Applied Economics, 2001, vol. 33, issue 3, 19

Abstract: A model to value Federal Agricultural Mortgage Corporation (Farmer Mac) agricultural mortgage-backed securities (AMBS) is developed and numerically solved. The results suggest prepayment penalties currently being used by Farmer Mac reduce yields on AMBS considerably. Even with prepayment penalties, it can be advantageous for profit maximizing mortgagors to optimally prepay or even default on agricultural mortgages. The model is used to quantify prepayment and default risk by valuing the embedded options in the mortgages. Monte Carlo simulation is also used to determine the probability to optimal prepayment given the term structure assumption used to develop the model.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (5)

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Journal Article: Valuing Agricultural Mortgage-Backed Securities (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:joaaec:15459

DOI: 10.22004/ag.econ.15459

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