Format | |
---|---|
BibTeX | |
MARCXML | |
TextMARC | |
MARC | |
DublinCore | |
EndNote | |
NLM | |
RefWorks | |
RIS |
Files
Abstract
A framework is identified for modeling credit risk in agriculture. A CreditRisk+ type
model is deemed most suitable for agricultural lending. The CreditRisk+ model is modified to
overcome its drawbacks by incorporating recent research that accounts for sector correlations and
uses a more stable and accurate algorithm. The model is applied to AgStar Financial Services,
ACA, a cooperative agricultural lender, in order to determine how such a lender may adapt this
model for portfolio risk analysis and to make capital and portfolio management decisions. The
model generates a loan loss distribution, which is used to derive the lender’s expected and
unexpected losses for the overall portfolio and individual loans. The model shows that AgStar is
more than adequately capitalized based on the parameters estimated using 1997-2002 data. Since
AgStar’s capital position is lower than that of most other associations, this raises the issue of
overcapitalization within the Farm Credit System.