Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India
This research analyzes daily commodity spot prices and designs risk contingent structured financial instruments as a means to mitigate business and financial risk by reducing debt obligations depending on the embedded commodity options whose payoffs are linked with commodity price fluctuations. Models are developed for operating loans and farm mortgages. The results show that the distributions with the embedded option have higher probability of greater returns and the embedded option with the repayment contingent on the price fluctuation reduces the downside risk of the return from the investment.
|Date of creation:||2008|
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|Contact details of provider:|| Web page: http://www.agfin.ifas.ufl.edu/|
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- Robert J. Myers & Stanley R. Thompson, 1989. "Optimal Portfolios of External Debt in Developing Countries: The Potential Role of Commodity-Linked Bonds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 517-522.
- Turvey, Calum G., 2005.
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2005 International Congress, August 23-27, 2005, Copenhagen, Denmark
24525, European Association of Agricultural Economists.
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- Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, March.
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- David Heath & Robert Jarrow & Andrew Morton, 2008.
"Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation,"
World Scientific Book Chapters,
in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305
World Scientific Publishing Co. Pte. Ltd..
- Heath, David & Jarrow, Robert & Morton, Andrew, 1992. "Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation," Econometrica, Econometric Society, vol. 60(1), pages 77-105, January.
- Rajan, Raghuram, 1988. "Pricing commodity bonds using binomial option pricing," Policy Research Working Paper Series 136, The World Bank.
- Todd E. Petzel, 1989. "Financial Risk Management Needs of Developing Countries: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 531-533.
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