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Abstracts Robert A. Collins and Larry S. Karp Data collected during the farm credit crisis are reused in an attempt to confront alternative capital structure models with data. While the equations are misspecified, the results appear to be more consistent with a dynamic optimal control model of capital than a static expected utility model. Key words: debt, capital structure, econometrics. Expected Farm Mortgage Default Cost Cheryl S. DeVuyst, Eric A. DeVuyst, and Timothy G. Baker The writing of a non-recourse loan can be viewed as if the lender is writing a put option. The asset underlying the put is the collateral (land in the case of an agricultural mortgage) and the exercise price is the principal. The value of the put is equivalent to the expected cost of collateral risk. We develop and demonstrate an option pricing model to evaluate the expected cost of collateral risk. Implications for agricultural lenders are discussed. Key words: collateral risk, option pricing models, loan pricing, default cost. Credit Subsidies and Transactions Costs of Two Government Credit Programs in Ohio Jeffrey H. Kalbus, Warren F. Lee, and Gary D. Schnitkey This study examines credit subsidies and lenders' transactions costs for Ohio's Linked Deposit (LD) program and Farmers Home Administration's (FmHA) guaranteed loan program. The largest portion of Ohio's LD program credit subsidy originates from its funding costs, while most of FmHA's subsidy results from its default risk costs. Lenders perceive the LD program as one that offers borrowers a reduction in interest rates with relatively little effort on their part. In contrast, the FmHA guaranteed loan program has high transactions costs for lenders; however, they receive up to 90% protection against loan loss. Key words: government credit programs, credit subsidies, transactions costs, lending costs, default risk costs. The Chapter 12 Experience in the U.S.: Regional Comparisons and Analysis of Filing, Discharge, and Failure Rates Bruce L. Dixon, Edward M. Flynn, and Janet A. Flaccus Filing and case disposition data for the 16,744 Chapter 12 petitions filed in the United States from the inception of Chapter 12 in November 1986 through December 1994 are analyzed. Ten regions are defined. Substantial regional and time differences are identified for proportions of farms filing Chapter 12 and how Chapter 12 cases are terminated. Results show that the proportion of farms filing for Chapter 12 has been relatively stable since 1989. Estimates indicate farmers still frequently use other bankruptcy chapters. Moreover, it appears a smaller proportion of recent Chapter 12 filings will be successful than in the past. Key words: Chapter 12, bankruptcy, national data, filing and disposition rates. A Neural Networks Primer for Agricultural Economists Terry L. Kastens, Allen M. Featherstone, and Arlo W. Biere This article is designed to allow an agricultural economist to expediently reach an introductory understanding of neural networks. A general backpropagation-estimated feedforward artificial neural network is developed, using matrix algebra notation. A hedonic price model for used combines in the Great Plains is estimated with an ordinary least squares regression model as well as with a neural network. Partial derivatives as well as out-of-sample forecasting ability are compared across the two models. The neural net appears superior to the regression model where dependent variable data are sparse. Where successive dependent variable intervals are more uniformly represented by data, the linear regression model appears superior. The neural network appears better able to distinguish the effects of collinear variables. Key words: backpropagation, combines, farm machinery pricing, forecasting, neural networks. Application of Mathematical Programming Techniques in Credit Scoring of Agricultural Loans Houshmand A. Ziari, David J. Leatham, and Calum G. Turvey Statistical discriminant analysis methods have long been the standard for dealing with classification problems. In recent years, much theoretical research has focused on the application of mathematical programming (MP) techniques to the discriminant problem (e.g., credit scoring). In many experiments with simulated data, researchers have shown that MP techniques rival or outperform statistical discriminant techniques. However, no extensive study has been conducted which compares the performance of alternative MP techniques using real-world data. This article evaluates the classification performance of alternative MP techniques for screening loan applications using logit and Fisher's linear discriminant function models as a performance benchmark. The results show that the MP models perform as well as statistical models. In some cases, one variant of MP model marginally outperforms the statistical models. Key words: credit scoring, mathematical programming, logit, discriminant analysis. Experiential Learning Through Trading Agricultural Commodities Ted C. Schroeder, William I. Tierney Jr., and Harvey Kiser Traditional courses in commodity futures markets have used simulations and paper-trading exercises to facilitate student understanding. In addition, simulations and other techniques have been used to teach various trading concepts. When using the technique of active student participation, however, students permitted to trade commodity futures contracts using student-invested money will greatly strengthen their understanding of the necessary analyses, concepts, value of information, and risks associated with trading. Students also learn how to manage a portfolio of investments. Disadvantages of this technique include potential for the fund to go bankrupt, and lack of generalizations that may be forthcoming from a single semester of trading. Key words: experiential learning, teaching simulations, teaching futures markets. The Leverage Game: Teaching Growth, Leverage, and Risk in a Dynamic, Experiential Framework Arnold W. Oltmans Teaching abstract economic concepts to students who see the world in concrete terms can be enhanced through the use of games, simulations, and experiential learning activities. This article presents a valuable game technique for teaching the abstract concepts of financial growth, risk, leverage, and diversification in a concrete manner. The game vividly illustrates and allows students to personally experience the interactions among growth in equity, investment returns, cost of debt, leverage, and their own risk preferences. Students make financial decisions in a dynamic environment of changing expectations and variations in actual business performance. Response by students to the game is enthusiastic and positive; subjective and objective evaluations indicate learning is greatly enhanced. The game is easily adapted to various classroom and economic scenarios, and it has potential extension and research applications as well. Key words: abstract, concrete, learning style, ROA, ROE, leverage, equity growth, cost of debt, risk, probability, dynamic. Individualized Help for Major Farm Transition Decisions: The New York FarmNet Case John Brake New York FarmNet was one of a number of farmer help lines begun in the mid-1980s to provide individualized help to farmers facing major transitions. Three program evaluations found that the program:
Key words: financial stress, farmer help line, farm safety net, extension program, extension clientele, farm management, farm decision making. A Distance-Learning Approach to Borrower Training Gregory D. Hanson Satellite up-link instruction from Penn State and on-site leadership by county agents contributed to successful financial management training for borrowers of the Consolidated Farm Services Agency Credit Division. The distance-learning approach promoted the consistency of the instruction for approximately 260 farm family members. The training included pretesting to determine the level of expertise at the outset, and quizzes to determine comprehension of core materials. Videos that treated the financial management problems of ongoing farmers motivated each workshop session. The distance-learning methods utilized are well suited for multi-state cooperative efforts in borrower training. Key words: borrower training, distance learning, extension finance.
Send questions and comments to Faye Butts: fsb1@cornell.edu This page was last modified on: 01/05/09 |
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