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Efficient Estimation of Copula Mixture Model: An Application to the Rating of Crop Revenue Insurance

Author

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  • Ghosh, Somali
  • Woodard, Joshua D.
  • Vedenov, Dmitry V.

Abstract

The association between prices and yields are of paramount importance to the crop insurance programs. Proper estimation of the association is highly desirable. Copulas are one such method to measure the dependence structure. Five single parametric copulas, a non- parametric copula and their fifteen different combinations taking a mixture of two different copulas at a time have been used in the crop insurance rating analysis. Using data of corn from 1973-2009 for 602 counties in the Mid-West area two different efficient methods have been proposed to generate the optimal mixtures using the cross validation approach. A resampling technique is used to check for the significance of the expected indemnities.

Suggested Citation

  • Ghosh, Somali & Woodard, Joshua D. & Vedenov, Dmitry V., 2011. "Efficient Estimation of Copula Mixture Model: An Application to the Rating of Crop Revenue Insurance," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103738, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea11:103738
    DOI: 10.22004/ag.econ.103738
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    References listed on IDEAS

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    1. Octavio A. Ramírez, 1997. "Estimation and Use of a Multivariate Parametric Model for Simulating Heteroskedastic, Correlated, Nonnormal Random Variables: The Case of Corn Belt Corn, Soybean, and Wheat Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 191-205.
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    Cited by:

    1. Molly Sears & Jeffrey M. Perloff & Wolfram Schlenker & Ximing Wu, 2026. "Crop Failures from Temperature and Precipitation Shocks: Implications for US Crop Insurance," NBER Chapters, in: Risk and Risk Management in the Agricultural Economy, National Bureau of Economic Research, Inc.
    2. Osama Ahmed & Teresa Serra, 2015. "Economic analysis of the introduction of agricultural revenue insurance contracts in Spain using statistical copulas," Agricultural Economics, International Association of Agricultural Economists, vol. 46(1), pages 69-79, January.

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