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Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance

Author

Listed:
  • Thiagu Ranganathan

    (University of Delhi (North Campus))

  • Usha Ananthakumar

    (Indian Institute of Technology Bombay)

Abstract

This paper analyses hedging using price risk management instruments in presence of crop yield, crop revenue and rainfall insurance for soybean farmers in Dewas district of India. Using numerical simulations, we analyse the demand for hedging and performance of the hedging strategies involving futures, options and different insurance products. We also study the impact of risk aversion, biases in futures prices and transaction costs on various hedging strategies and potential benefits from these strategies. Results indicate that in most scenarios, farmer’s welfare (in terms of willingness to receive) is improved by using insurance products along with hedging.

Suggested Citation

  • Thiagu Ranganathan & Usha Ananthakumar, 2017. "Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 151-171, March.
    • Handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-016-0041-8
    DOI: 10.1007/s40953-016-0041-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Hedging; Crop yield insurance; Crop revenue insurance; Rainfall insurance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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