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Research on Corn Income Insurance Pricing under the "Insurance + Futures" Model

Author

Listed:
  • Mike S. Li
  • Desheng Guo
  • Miaoshi Lin
  • Chengyi Pu

Abstract

Global climate change has increased systemic risks for grain-producing households. It has led to fluctuations in corn yields and prices, which threaten the stability of farmers' incomes. China has developed an innovative agricultural risk management mechanism through the 'insurance plus futures' model, which transfers farmers' income risks to the futures market. However, existing agricultural income insurance programs face major challenges, including the absence of standardized yield and price data and inefficiencies in risk pricing. This paper develops an income-insurance pricing model that integrates Copula functions with Asian options. The model relaxes the traditional assumption of risk independence and mitigates the impact of short-term price volatility on insurance payouts. Empirical analysis based on the 2024 corn "insurance plus futures" project in Da'an City, Jilin Province, shows that the proposed model strengthens agricultural risk protection, optimizes premium rate design, and improves product sustainability. The findings offer methodological innovation for improving China's policy-based agricultural insurance system.

Suggested Citation

  • Mike S. Li & Desheng Guo & Miaoshi Lin & Chengyi Pu, 2025. "Research on Corn Income Insurance Pricing under the "Insurance + Futures" Model," International Business Research, Canadian Center of Science and Education, vol. 18(6), pages 1-71, December.
    • Handle: RePEc:ibn:ibrjnl:v:18:y:2025:i:6:p:71
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    References listed on IDEAS

    as
    1. Tristan Kenderdine, 2018. "Insurance Plus Futures: Agricultural Commodity Price Reform in China," Asia and the Pacific Policy Studies 201824, Crawford School of Public Policy, The Australian National University.
    2. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    3. Boyle, Phelim P., 1977. "Options: A Monte Carlo approach," Journal of Financial Economics, Elsevier, vol. 4(3), pages 323-338, May.
    4. Tristan Kenderdine, 2018. "Insurance Plus Futures: Agricultural Commodity Price Reform in China," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 5(2), pages 331-346, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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