Hedging Crop Risk With Yield Insurance Futures And Options
This paper analyses the optimal hedging decisions for risk-averse producers facing crop risk, assuming crop yield insurance futures and options can be used. The first-best optimal hedge requires a futures position or an option position proportionate to the individual beta depending on whether the financial markets are perceived unbiased or biased. Using yield data for a sample of wheat producers in France, the producers' hedge ratios are derived. These new hedging instruments are more effective to reduce farm yield variability than the individual yield contracts, except if the individual yield guarantee is at least equal to the individual average yield.
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- Smith, Vincent H. & Chouinard, Hayley H. & Baquet, Alan E., 1994.
"Almost Ideal Area Yield Crop Insurance Contracts,"
Agricultural and Resource Economics Review,
Cambridge University Press, vol. 23(01), pages 75-83, April.
- Smith, Vincent H. & Chouinard, Hayley H. & Baquet, Alan E., 1994. "Almost Ideal Area Yield Crop Insurance Contracts," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 23(1), April.
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- Jerry R. Skees & J. Roy Black & Barry J. Barnett, 1997. "Designing and Rating an Area Yield Crop Insurance Contract," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 430-438.
- Garcia, Philip & Adam, Brian D. & Hauser, Robert J., 1994. "The Use Of Mean-Variance For Commodity Futures And Options Hedging Decisions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(01), July.
- Olivier Mahul, 1999. "Optimum Area Yield Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 75-82.
- Mario J. Miranda & Joseph W. Glauber, 1997. "Systemic Risk, Reinsurance, and the Failure of Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 206-215.
- Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-430, June. Full references (including those not matched with items on IDEAS)
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