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Discrete And Continuous Time Models For Farm Credit Migration Analysis

Author

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  • Deng, Xiaohui
  • Escalante, Cesar L.
  • Barry, Peter J.
  • Yu, Yingzhuo

Abstract

This paper introduces two continuous time models, i.e. time homogenous and non-homogenous Markov chain models, for analyzing farm credit migration as alternatives to the traditional discrete time model cohort method. Results illustrate that the two continuous time models provide more detailed, accurate and reliable estimates of farm credit migration rates than the discrete time model. Metric comparisons among the three transition matrices show that the imposition of the potentially unrealistic assumption of time homogeneity still produces more accurate estimates of farm credit migration rates, although the equally reliable figures under the non-homogenous time model seem more plausible given the greater relevance and applicability of the latter model to farm business conditions.

Suggested Citation

  • Deng, Xiaohui & Escalante, Cesar L. & Barry, Peter J. & Yu, Yingzhuo, 2004. "Discrete And Continuous Time Models For Farm Credit Migration Analysis," 2004 Annual meeting, August 1-4, Denver, CO 20062, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea04:20062
    DOI: 10.22004/ag.econ.20062
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    Cited by:

    1. Katchova, Ani L. & Nam, Sangjeong, 2005. "Credit Risk Migration Analysis Focused on Farm Business Characteristics and Business Cycles," 2005 Annual meeting, July 24-27, Providence, RI 19451, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Zhang, Tianwei & Katchova, Ani L., 2005. "Credit Risk Migration Analysis of Illinois Farm Business: Possible Impacts of Farm Business Cycle," 2005 Annual meeting, July 24-27, Providence, RI 19292, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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    Keywords

    Agricultural Finance;

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