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The migration approach to credit risk measurement is based on historic rates of movements of individual loans among the classes of a lenders riskrating or creditscoring system. This article applies the migration concept to farmlevel data from Illinois to estimate migration rates for a farmers...
The moral hazard problem which obstructs external equity financing of farm businesses is studied using the principalagent framework. We assume that the supplier of external equity capital the principal cannot directly observe the farmers agents effort, but can observe the random outcome of the...
A simulation methodology is applied to the loan loss reserve process of an agricultural lender. Weaknesses of the pointestimate approach to estimating loan loss reserves are addressed with a bottomup model. Modeling includes consideration of the producers and the lenders diversification efforts....
One of the particular problems facing agribusiness firms is the relationship between commodity price risk a source of business risk and debt repayment ability a source of financial risk. This study examines the use of commoditylinked loans applied to agricultural credits. A commoditylinked loan...
The Capital Asset Pricing Model CAPM is used to estimate the cost of equity for each of 62 New York dairy farms that participated in a business analysis program from 1988 through 1997. The estimated betas were statistically less than one for all farms. Riskadjusted interest rates ranged from a...
This study identifies key strategies employed by Illinois grain farms to prevent the erosion of their equity positions due to significant downturns in commodity prices during the implementation of the 1996 farm bill. The econometric results emphasize the collective importance of revenue...
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