Evaluating agricultural catastrophic risk
Purpose – The purpose of this paper is to provide an evaluation method for agricultural catastrophic risk. Design/methodology/approach – Data on agricultural disaster loss are collected based on hectares covered by natural disasters, hectares affected by natural disasters, and hectares destroyed by natural disasters using the standard process. Peak over threshold (POT) approach based on the extreme value theory is used to model the distribution of agricultural catastrophic loss, and value at risk (VaR) is used to assess agricultural catastrophic risk. Findings – This paper provides an approach for collecting agricultural loss data and modelling probability distribution of agricultural catastrophic loss, which is promising for agricultural catastrophic risk evaluating. As the quantified measurement of agricultural catastrophic risk, VaR is observed to be appropriate and feasible. Results of empirical research demonstrate that drought catastrophe negatively affects grain-production in the northeast region of China; in particular, the drought catastrophic risk is severe within a 100-year scenario and thus is expected to recur. Originality/value – To provide an accurate agricultural catastrophic risk assessment, data collection based on disaster occurrence instead of crop yield, and VaR is used in this paper.
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Volume (Year): 3 (2011)
Issue (Month): 4 (November)
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References listed on IDEAS
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- Goodwin, Barry K. & Mahul, Olivier, 2004. "Risk modeling concepts relating to the design and rating of agricultural insurance contracts," Policy Research Working Paper Series 3392, The World Bank.
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- Octavio A. Ramirez & Sukant Misra & James Field, 2003. "Crop-Yield Distributions Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 108-120.
- Joseph W. Glauber, 2004. "Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1179-1195.
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