Credit Risk Models and Agricultural Lending |
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| Authors: | Ani L Katchova Peter J Barry |
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| Institution: | Ani L. Katchova is assistant professor and Peter J. Barry is professor, Department of Agricultural and Consumer Economics, University of Illinois at Urbana–Champaign. |
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| Abstract: | 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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| Keywords: | credit risk credit value-at-risk debt default New Basel Accord |
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