Credit Risk Models: An Application to Agricultural Lending

Ani Katchova and Peter J. Barry

No 132519, 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri from Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition

Abstract: Credit risk models are developed and used to estimate capital requirements for agricultural lenders under the New Basel Capital Accord. The theoretical models combine Merton’s distance-to-default approach with credit value-at-risk methodologies. Two applied models, CreditMetrics and KMV, are illustrated using farm financial data. Expected and unexpected losses for a portfolio of farms are calculated using probability of default, loss given default, and portfolio risk measures. The results show that credit quality and correlations among farms play a significant role in risk pricing for agricultural lenders.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Pages: 22
Date: 2003
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:nc2003:132519

DOI: 10.22004/ag.econ.132519

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