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Measurement Of Price Risk In Revenue Insurance: Implications Of Distributional Assumptions

Author

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  • Roberts, Matthew C.
  • Goodwin, Barry K.
  • Coble, Keith H.

Abstract

A variety of crop revenue insurance programs is now available. These programs require measurement of price risk. This article investigates the appropriateness of distributional assumptions underlying current and proposed alternative actuarial methods. Our results find that prices are best modeled using a flexible mixture of normals distribution.

Suggested Citation

  • Roberts, Matthew C. & Goodwin, Barry K. & Coble, Keith H., 1998. "Measurement Of Price Risk In Revenue Insurance: Implications Of Distributional Assumptions," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20840, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea98:20840
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    References listed on IDEAS

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    1. Hennessy, David A. & Wahl, Thomas I., 1996. "Effects of Decisionmaking on the Futures Price Volatility, The," Staff General Research Papers Archive 5031, Iowa State University, Department of Economics.
    2. Hall, Joyce A. & Brorsen, B. Wade & Irwin, Scott H., 1989. "The Distribution of Futures Prices: A Test of the Stable Paretian and Mixture of Normals Hypotheses," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(01), pages 105-116, March.
    3. 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.
    4. David A. Hennessy & Thomas I. Wahl, 1996. "The Effects of Decision Making on Futures Price Volatility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 591-603.
    5. Jeffrey R. Stokes & William I. Nayda & Burton C. English, 1997. "The Pricing of Revenue Assurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 439-451.
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    Citations

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    Cited by:

    1. Richards, Timothy J. & Manfredo, Mark R., 2003. "Infrequent Shocks and Rating Revenue Insurance: A Contingent Claims Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 2), pages 1-19, August.
    2. Buschena, David E. & Ziegler, Lee, 1999. "Reliability Of Options Markets For Crop Revenue Insurance Rating," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 2), pages 1-26, December.
    3. Anonymous, 2005. "Articles from Volume 1, Issue 2, 2005, Journal of International Agricultural Trade and Development," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 1(2).
    4. Framingham, Charles F. & Craddock, W.J., 1974. "Urban Implications of Regional and Interregional Efficiency in Agricultural Production," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 0(Issue 1), pages 1-18.
    5. Bielza, María & Garrido, Alberto & Sumpsi, José M., 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Cahiers d'Economie et de Sociologie Rurales (CESR), Institut National de la Recherche Agronomique (INRA), vol. 0.
    6. Kirk, Robert, 1971. "Growth Potential Identification and Public Investment Strategy," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 0(Issue 1), pages 1-12.
    7. Peterson, Hikaru Hanawa & Tomek, William G., 2000. "Commodity Price Behavior: A Rational Expectations Storage Model of Corn," Working Papers 127682, Cornell University, Department of Applied Economics and Management.
    8. Ozaki, Vitor Augusto & Olinda, Ricardo & Faria, Priscila Neves & Campos, Rogerio Costa, 2014. "Estimation of the Agricultural Probability of Loss: evidence for soybean in Paraná Stats," Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 0(Number 1), pages 1-16, March.
    9. Ozaki, Vitor Augusto & Adami, Andreia Cristina de Oliveira, 2013. "Managing the Agricultural Revenue Risk in Brazil: Implications for Developing a Crop Insurance Program," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151289, Agricultural and Applied Economics Association.
    10. María Bielza & Alberto Garrido & José M. Sumpsi, 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 70, pages 5-27.
    11. Jindřich Špička, 2009. "The Risk Analysis in the Agricultural Enterprises using Earnings at Risk Method," Ekonomika a Management, University of Economics, Prague, vol. 2009(3).
    12. Nganje, William E. & Tiapo, Napoleon M. & Wilson, William W., 2001. "Crop Insurance Under Quality Uncertainty," 2001 Annual Meeting, July 8-11, 2001, Logan, Utah 36097, Western Agricultural Economics Association.
    13. Makus, Larry D. & Wang, H. Holly & Chen, Xiaomei, 2003. "Evaluating Risk Management Strategies For Non-Irrigated Small Grain Producers," 2003 Annual meeting, July 27-30, Montreal, Canada 22257, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Hikaru Hanawa Peterson & William G. Tomek, 2005. "How much of commodity price behavior can a rational expectations storage model explain?," Agricultural Economics, International Association of Agricultural Economists, vol. 33(3), pages 289-303, November.
    15. Anderson, Jock R., 2003. "Risk in rural development: challenges for managers and policy makers," Agricultural Systems, Elsevier, vol. 75(2-3), pages 161-197.
    16. María Bielza & Alberto Garrido & José M. Sumpsi, 2004. "Revenue insurance as an income stabilization policy: an application to the Spanish olive oil sector," Post-Print hal-01201063, HAL.
    17. Unknown, 2012. "Journal of International Agricultural Trade and Development, Volume 08, Issue 1," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 0(Number 1), pages 112-112.
    18. Benjamin Dennis & Talan Iscan, 2002. "Terms of Trade Risk," Department of Economics at Dalhousie University working papers archive totrisk, Dalhousie, Department of Economics.
    19. Chen, Shu-Ling & Miranda, Mario J., 2006. "Modeling Yield Distribution In High Risk Counties: Application To Texas Upland Cotton," 2006 Annual meeting, July 23-26, Long Beach, CA 21392, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Ker, Alan. P & Tolhurst, Tor & Liu, Yong, 2015. "Rating Area-yield Crop Insurance Contracts Using Bayesian Model Averaging and Mixture Models," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205211, Agricultural and Applied Economics Association.
    21. Bielza, Maria & Garrido, Alberto & Sumpsi, Jose Maria, 2002. "Revenue Insurance as an Income Stabilization Policy: An Application to the Spanish Olive Oil Sector," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24842, European Association of Agricultural Economists.
    22. Tóth, M. & Lančarič, D. & Piterková, A. & Savov, R., 2014. "Systematic Risk in Agriculture: A Case of Slovakia," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 0(Number 4), pages 1-9, December.

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