IDEAS home Printed from https://ideas.repec.org/a/ibn/ibrjnl/v18y2025i6p71.html

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
    as

    Download full text from publisher

    File URL: https://ccsenet.org/journal/index.php/ibr/article/download/0/0/52544/57226
    Download Restriction: no
    File URL: https://ccsenet.org/journal/index.php/ibr/article/view/0/52544
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Boyle, Phelim P., 1977. "Options: A Monte Carlo approach," Journal of Financial Economics, Elsevier, vol. 4(3), pages 323-338, May.
    2. 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.
    3. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
    4. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pringles, Rolando & Olsina, Fernando & Penizzotto, Franco, 2020. "Valuation of defer and relocation options in photovoltaic generation investments by a stochastic simulation-based method," Renewable Energy, Elsevier, vol. 151(C), pages 846-864.
    2. François-Michel Boire & R. Mark Reesor & Lars Stentoft, 2025. "Bias Correction in the Least-Squares Monte Carlo Algorithm," Computational Economics, Springer;Society for Computational Economics, vol. 65(6), pages 3161-3205, June.
    3. Yongxin Yang & Yu Zheng & Timothy M. Hospedales, 2016. "Gated Neural Networks for Option Pricing: Rationality by Design," Papers 1609.07472, arXiv.org, revised Mar 2020.
    4. Boris Ter-Avanesov & Homayoon Beigi, 2024. "MLP, XGBoost, KAN, TDNN, and LSTM-GRU Hybrid RNN with Attention for SPX and NDX European Call Option Pricing," Papers 2409.06724, arXiv.org, revised Oct 2024.
    5. Suresh M. Sundaresan, 2000. "Continuous‐Time Methods in Finance: A Review and an Assessment," Journal of Finance, American Finance Association, vol. 55(4), pages 1569-1622, August.
    6. Tobias Lipp & Grégoire Loeper & Olivier Pironneau, 2013. "Mixing Monte-Carlo and Partial Differential Equations for Pricing Options," Post-Print hal-01558826, HAL.
    7. Chen, Ding & Härkönen, Hannu J. & Newton, David P., 2014. "Advancing the universality of quadrature methods to any underlying process for option pricing," Journal of Financial Economics, Elsevier, vol. 114(3), pages 600-612.
    8. Kristensen, Dennis & Mele, Antonio, 2011. "Adding and subtracting Black-Scholes: A new approach to approximating derivative prices in continuous-time models," Journal of Financial Economics, Elsevier, vol. 102(2), pages 390-415.
    9. Katarzyna Toporek, 2012. "Simple is better. Empirical comparison of American option valuation methods," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 29.
    10. Rongwen Wu & Michael C. Fu, 2003. "Optimal Exercise Policies and Simulation-Based Valuation for American-Asian Options," Operations Research, INFORMS, vol. 51(1), pages 52-66, February.
    11. Georgievski, Alex & Masih, A. Mansur M., 2004. "An analysis of option pricing under systematic consumption risk using GARCH," Research in International Business and Finance, Elsevier, vol. 18(2), pages 151-171, June.
    12. Zafar Ahmad & Reilly Browne & Rezaul Chowdhury & Rathish Das & Yushen Huang & Yimin Zhu, 2023. "Fast American Option Pricing using Nonlinear Stencils," Papers 2303.02317, arXiv.org, revised Oct 2023.
    13. Süleyman Cengizci & Ömür Uğur, 2025. "A Computational Study for Pricing European- and American-Type Options Under Heston’s Stochastic Volatility Model: Application of the SUPG-YZ $$\beta$$ β Formulation," Computational Economics, Springer;Society for Computational Economics, vol. 66(1), pages 179-206, July.
    14. Zhuo Chen & Bo Yan & Hanwen Kang, 2023. "Price bubbles of agricultural commodities: evidence from China’s futures market," Empirical Economics, Springer, vol. 64(1), pages 195-222, January.
    15. Ravi Kashyap, 2016. "Options as Silver Bullets: Valuation of Term Loans, Inventory Management, Emissions Trading and Insurance Risk Mitigation using Option Theory," Papers 1609.01274, arXiv.org, revised Mar 2022.
    16. Ahmadian, D. & Ballestra, L.V. & Shokrollahi, F., 2022. "A Monte-Carlo approach for pricing arithmetic Asian rainbow options under the mixed fractional Brownian motion," Chaos, Solitons & Fractals, Elsevier, vol. 158(C).
    17. Ahmad Aghapour & Erhan Bayraktar & Fengyi Yuan, 2025. "Solving dynamic portfolio selection problems via score-based diffusion models," Papers 2507.09916, arXiv.org, revised Aug 2025.
    18. Sina Kazemian & Ghazal Farhani & Amirhessam Yazdi, 2025. "An uncertainty-aware physics-informed neural network solution for the Black-Scholes equation: a novel framework for option pricing," Papers 2511.05519, arXiv.org.
    19. Li, Hongshan & Huang, Zhongyi, 2020. "An iterative splitting method for pricing European options under the Heston model☆," Applied Mathematics and Computation, Elsevier, vol. 387(C).
    20. Rahul Kumar Singh, 2023. "Efficiency of Wheat Futures across APMC Mandis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 681-701, September.

    More about this item

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:ibrjnl:v:18:y:2025:i:6:p:71. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.