Zur Bewertung von Wetterderivaten als innovative Risikomanagementinstrumente in der Landwirtschaft
The importance of weather as a production factor in agriculture is well established long time and a significant portion of yield fluctuations is caused by weather risks. Traditionally, farmers have tried to hedge against unfavorable weather using insurance, such as crop insurance. In recent years a new class of instruments, so called weather derivatives, have emerged. They allows to reduce weather based risks as well. Weather derivatives are financial market products such as forwards, futures, options and swaps, that have a weather component such as temperature or rainfall. Although weather derivatives have some advantages compared to traditional insurance, their trading volume is still rather small. One reason (among others) for why potential users hesitate to enter the market are the difficulties to determine a fair price for these products. Financial pricing methods such as the Black-Scholes formula cannot be directly applied since weather is not a tradable asset. In this article, various pricing methods are investigated and applied to actual weather data. One important finding is that there are considerable differences between the pricing methods. We identify the strengths and weaknesses of the pricing methods and give some recommendations for their application. Our results may be relevant not only for producers but also for potential sellers of weather derivatives.
Volume (Year): 54 (2005)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: Philippstr. 13, 10115 Berlin|
Phone: +49 (0)30 2093 6305
Fax: +49 (0)30 2093 6497
Web page: http://www.gjae-online.de/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter Alaton & Boualem Djehiche & David Stillberger, 2002. "On modelling and pricing weather derivatives," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(1), pages 1-20.
- Nancy McCarthy, 2003. "Demand for rainfall-index based insurance: a case study from Morocco," EPTD discussion papers 106, International Food Policy Research Institute (IFPRI).
- Sean D. Campbell & Francis X. Diebold, 2005.
"Weather Forecasting for Weather Derivatives,"
Journal of the American Statistical Association,
American Statistical Association, vol. 100, pages 6-16, March.
- Campbell, Sean D. & Diebold, Francis X., 2004. "Weather forecasting for weather derivatives," CFS Working Paper Series 2004/10, Center for Financial Studies (CFS).
- Sean D. Campbell & Francis X. Diebold, 2003. "Weather Forecasting for Weather Derivatives," NBER Working Papers 10141, National Bureau of Economic Research, Inc.
- Sean D. Campbell & Francis X. Diebold, 2002. "Weather Forecasting for Weather Derivatives," Center for Financial Institutions Working Papers 02-42, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Robert G. Chambers & John Quiggin, 2004.
"Technological and financial approaches to risk management in agriculture: an integrated approach ,"
Australian Journal of Agricultural and Resource Economics,
Australian Agricultural and Resource Economics Society, vol. 48(2), pages 199-223, 06.
- Chambers, Robert G. & Quiggin, John C., 2004. "Technological and financial approaches to risk management in agriculture: an integrate approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages -, June.
- Chen, Gang & Roberts, Matthew C. & Thraen, Cameron S., 2006.
"Managing Dairy Profit Risk Using Weather Derivatives,"
Journal of Agricultural and Resource Economics,
Western Agricultural Economics Association, vol. 31(03), pages -, December.
- Chen, Gang & Roberts, Matthew C. & Thraen, Cameron S., 2003. "Managing Dairy Profit Risk Using Weather Derivatives," 2003 Conference, April 21-22, 2003, St. Louis, Missouri 18971, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
- Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
- Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "An Intertemporal General Equilibrium Model of Asset Prices," Econometrica, Econometric Society, vol. 53(2), pages 363-384, March.
- M. Davis, 2001. "Pricing weather derivatives by marginal value," Quantitative Finance, Taylor & Francis Journals, vol. 1(3), pages 305-308, March.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
- Cao, M. & Wei, J., 1999. "Pricing Weather Derivative : An Equilibrium Approach," Rotman School of Management - Finance 99-002, Rotman School of Management, University of Toronto.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
When requesting a correction, please mention this item's handle: RePEc:ags:gjagec:97216. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.