Pricing farm loans for credit risk

This article analyses the risk-return efficiency of limits to which loan pricing accounts for credit risk in the Australian-farm sector. A key issue faced by banks is the trade-off between raising returns through higher risk premiums and the possibility of impairing credit quality. The simulation results suggest that the stochastic efficiency of the size of risk-pricing limits is positively related to volatility of farm income when dynamic relationships are considered. This finding implies that Australian banks should price further across the credit-risk spectrum to farm businesses with relatively volatile incomes compared to those with stable incomes.

Issue Date:
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
PURL Identifier:
Total Pages:

 Record created 2017-04-01, last modified 2019-08-30

Download fulltext

Rate this document:

Rate this document:
(Not yet reviewed)