Agricultural bank portfolio adjustments to risk

Glenn D. Pederson

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

An asset allocation model is developed in which the bank’s problem is one of selecting the mix of loan assets and securities that will generate desired levels of portfolio return and risk. A reduced-form, econometric model is derived and historical rural bank asset allocations are predicted. Asset equations show consistency with the framework of equilibrium adjustments under uncertainty. Higher expected default rates on variable rate loans result in significant joint effects, which alter a bank’s optimal allocation.

Original languageEnglish (US)
Pages (from-to)672-681
Number of pages10
JournalAmerican Journal of Agricultural Economics
Volume74
Issue number3
DOIs
StatePublished - Aug 1992

Keywords

  • Agricultural banks
  • Asset allocation
  • Risk
  • Variable-rate loans

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