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Reliability Of Options Markets For Crop Revenue Insurance Rating

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  • Buschena, David E.
  • Ziegler, Lee
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    Abstract

    Revenue insurance, only recently introduced for major crops in the U.S., has captured a considerable share of the multiple-peril insurance market. This study evaluates the predictive reliability of using price distributions inferred from options markets to rate revenue insurance products. We find for periods early in the crop growing season that price distributions inferred from options trades offer greater reliability than distributions based on historical futures trades. Options-based price distributions should receive further consideration in crop revenue insurance rating, but current administrative constraints must be considered.

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    File URL: http://purl.umn.edu/30806
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    Bibliographic Info

    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 24 (1999)
    Issue (Month): 02 (December)
    Pages:

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    Handle: RePEc:ags:jlaare:30806

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    Web page: http://waeaonline.org/
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    Related research

    Keywords: Risk and Uncertainty;

    References

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    1. Soderlind, P & Svensson, L-E-O, 1996. "New Techniques to Extract Market Expectations from Financial Instruments," Papers 621, Stockholm - International Economic Studies.
    2. Viswanath Tirupattur & Robert J. Hauser & Phelim P. Boyle, 1997. "Theory and Measurement of Exotic Options in U.S. Agricultural Support Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1127-1139.
    3. Goodwin, Barry K. & Roberts, Matthew C. & Coble, Keith H., 2000. "Measurement Of Price Risk In Revenue Insurance: Implications Of Distributional Assumptions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July.
    4. Singh, S K & Maddala, G S, 1976. "A Function for Size Distribution of Incomes," Econometrica, Econometric Society, vol. 44(5), pages 963-70, September.
    5. Jeffrey R. Stokes & William I. Nayda & Burton C. English, 1997. "The Pricing of Revenue Assurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 439-451.
    6. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
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