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Credit Risk Models and Agricultural Lending
Author(s) -
Katchova Ani L.,
Barry Peter J.
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.0002-9092.2005.00711.x
Subject(s) - probability of default , basel ii , loss given default , capital requirement , credit risk , risk adjusted return on capital , portfolio , agriculture , capital (architecture) , value at risk , basel iii , economics , capital adequacy ratio , economic capital , risk weighted asset , business , risk management , actuarial science , finance , financial capital , capital formation , microeconomics , profit (economics) , history , ecology , archaeology , biology , incentive
Credit risk models are developed and used to estimate capital requirements for agricultural lenders under the New Basel Capital Accord. The study uses credit value‐at‐risk methods to calculate probability of default, loss given default, and expected and unexpected losses. Two applied models, CreditMetrics and Moody's KMV, are estimated using farm financial data. The results show that the necessary capital for agricultural lenders under the New Basel Accord varies substantially depending on the riskiness and granularity of the portfolio.
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