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Application of credit risk models to agricultural lending

Application of credit risk models to agricultural lending A credit risk model suitable for agricultural lenders is identified. The model incorporates sector correlations and is applied to the loan portfolio of an agricultural credit association to create a distribution of loan losses. The distribution is used to derive the lenders expected and unexpected losses. Results of the analysis indicate that the association is more than adequately capitalized based on 1997S2002 data. Since the capital position of the association is lower than that of most other associations in the Farm Credit System, this raises the issue of overcapitalization in the System. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Application of credit risk models to agricultural lending

Zech, Lyubov; Pederson, Glenn
Agricultural Finance Review , Volume 64 (2): 16 – Nov 1, 2004
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16 pages

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-1466
DOI
10.1108/00214660480001156
Publisher site
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Abstract

A credit risk model suitable for agricultural lenders is identified. The model incorporates sector correlations and is applied to the loan portfolio of an agricultural credit association to create a distribution of loan losses. The distribution is used to derive the lenders expected and unexpected losses. Results of the analysis indicate that the association is more than adequately capitalized based on 1997S2002 data. Since the capital position of the association is lower than that of most other associations in the Farm Credit System, this raises the issue of overcapitalization in the System.

Journal

Agricultural Finance Review – Emerald Publishing

Published: Nov 1, 2004

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