The migration approach to credit risk measurement is based on historic rates of movements of individual loans among the classes of a lender’s risk-rating or creditscoring system. This article applies the migration concept to farm-level data from Illinois to estimate migration rates for a farmer’s credit score and other performance measures under different time-averaging approaches. Empirical results suggest greater stability in rating migrations for longer time-averaging periods (although less stable than bond migrations), and for the credit score criterion versus ROE and repayment capacity.
- Credit risk
- Credit scoring
- Transition probabilities
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics, Econometrics and Finance (miscellaneous)