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dc.titleDefault Risk in Agricultural Lending: The Effects of Commodity Price Volatility and Climate
dc.contributor.authorCastro, Carlos
dc.contributor.authorGarcia, Karen
dc.contributor.orgunitCapital Markets and Financial Institutions Division
dc.date.available2014-09-12T00:00:00
dc.date.issue2014-09-12T00:00:00
dc.description.abstractThis paper proposes and estimates a default risk model for agricultural lenders that explicitly accounts for two risks that are endemic to agricultural activities: commodity price volatility and climate. The results indicate that both factors are relevant in explaining the occurrence of default in the portfolio of a rural bank. In addition, the paper illustrates how to integrate the default risk model into standard techniques of portfolio credit risk modeling. The portfolio credit risk model provides a quantitative tool to estimate the loss distribution and the economic capital for a rural bank. The estimated parameters of the default risk model, along with scenarios for the evolution of the risk factors, are used to construct stress tests on the portfolio of a rural bank. These stress tests indicate that climate factors have a larger effect on economic capital than commodity price volatility.
dc.format.extent33
dc.identifier.doihttp://dx.doi.org/10.18235/0006991
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Default-Risk-in-Agricultural-Lending-The-Effects-of-Commodity-Price-Volatility-and-Climate.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectFinancial Service
dc.subjectFinancial Risk
dc.subject.jelcodeG17 - Financial Forecasting and Simulation
dc.subject.jelcodeQ14 - Agricultural Finance
dc.subject.jelcodeQ54 - Climate • Natural Disasters and Their Management • Global Warming
dc.subject.keywordsCredit risk;Rural banks;Climate risk
dc.typeDiscussion Papers
idb.identifier.pubnumberDiscussion Papers
idb.operationRG-T1670
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