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On the Premium for Revenue Insurance under Joint Price and Yield Risk

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Author Info
Alexander E. Saak
Abstract

This note provides two results pertaining to the pricing of agricultural revenue insurance contracts under joint price and yield risk. First, a weakening of the concordance ordering is used to sign the effect of greater dependence between the multiplicative risks (price and yield) on the expected indemnity payment. Second, sufficient conditions are found when the premium rate for revenue insurance is smaller (greater) than the premium for the corresponding single risk (price or yield) insurance.

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Publisher Info
Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 04-wp368.

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Date of creation: Jul 2004
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Handle: RePEc:ias:cpaper:04-wp368

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Related research
Keywords: concordance order; revenue insurance.;

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References listed on IDEAS
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  1. Harwood, Joy & Heifner, Richard & Coble, Keith & Perry, Janet & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  2. Richards, Timothy J. & Manfredo, Mark R., 2003. "Infrequent Shocks and Rating Revenue Insurance: A Contingent Claims Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(02), August. [Downloadable!]
  3. Buschena, David & Ziegler, Lee, 1999. "Reliability Of Options Markets For Crop Revenue Insurance Rating," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(02), December. [Downloadable!]
  4. Wang, H. Holly & Hanson, Steven D. & Black, J. Roy, 2003. "Efficiency Costs of Subsidy Rules for Crop Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(01), April. [Downloadable!]
  5. Denuit, Michel & Dhaene, Jan & Ribas, Carmen, 2001. "Does positive dependence between individual risks increase stop-loss premiums?," Insurance: Mathematics and Economics, Elsevier, vol. 28(3), pages 305-308, June. [Downloadable!] (restricted)
  6. Skees, Jerry R. & Harwood, Joy & Somwaru, Agapi & Perry, Janet, 1998. "The Potential For Revenue Insurance Policies In The South," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 30(01), July. [Downloadable!]
  7. Miller, Stephen E. & Kahl, Kandice H. & Rathwell, P. James, 2000. "Revenue Insurance For Georgia And South Carolina Peaches," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(01), April. [Downloadable!]
  8. Dhaene, Jan & Denuit, Michel, 1999. "The safest dependence structure among risks," Insurance: Mathematics and Economics, Elsevier, vol. 25(1), pages 11-21, September. [Downloadable!] (restricted)
  9. Stokes, Jeffrey R., 2000. "A Derivative Security Approach To Setting Crop Revenue Coverage Insurance Premiums," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(01), July. [Downloadable!]
  10. Makki, Shiva S. & Somwaru, Agapi, 2001. "Asymmetric Information in the Market for Yield and Revenue Insurance Products," Technical Bulletins 33587, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  11. Hennessy, David A. & Saak, Alexander E. & Babcock, Bruce A., 2003. "Fair Value Of Whole-Farm And Crop-Specific Revenue Insurance," 2003 Annual meeting, July 27-30, Montreal, Canada 21988, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  12. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance, The," Center for Agricultural and Rural Development (CARD) Publications 97-wp180, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  13. Chad E. Hart & Dermot J. Hayes & Bruce A. Babcock, 2003. "Insuring Eggs in Baskets," Food and Agricultural Policy Research Institute (FAPRI) Publications 03-wp339, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University. [Downloadable!]
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  14. Larry G. Epstein & Stephen M. Tanny, 1980. "Increasing Generalized Correlation: A Definition and Some Economic Consequences," Canadian Journal of Economics, Canadian Economics Association, vol. 13(1), pages 16-34, February. [Downloadable!] (restricted)
  15. Shihong Yin & Calum G. Turvey, 2003. "The Pricing of Revenue Assurance: Comment," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 85(4), pages 1062-1065, November. [Downloadable!] (restricted)
  16. Hennessy, David A. & Babcock, Bruce A. & Hayes, Dermot J., 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," Staff General Research Papers 1100, Iowa State University, Department of Economics. [Downloadable!]
  17. Hart, Chad E. & Hayes, Dermot J. & Babcock, Bruce A., 2003. "Insuring Eggs in Baskets: Should the Government Insure Individual Risks?," Staff General Research Papers 10669, Iowa State University, Department of Economics.
    Other versions:
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