Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India
AbstractThis research analyzes daily commodity spot prices and designs risk contingent structured financial instruments as a means to mitigate business and financial risk by reducing debt obligations depending on the embedded commodity options whose payoffs are linked with commodity price fluctuations. Models are developed for operating loans and farm mortgages. The results show that the distributions with the embedded option have higher probability of greater returns and the embedded option with the repayment contingent on the price fluctuation reduces the downside risk of the return from the investment.
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Bibliographic InfoPaper provided by Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition in its series Proceedings: 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri with number 48139.
Date of creation: 2008
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Web page: http://www.agfin.ifas.ufl.edu/
Agricultural Finance; Risk and Uncertainty;
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