IDEAS home Printed from https://ideas.repec.org/p/ags/nc1007/48139.html
   My bibliography  Save this paper

Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India

Author

Listed:
  • Shee, Apurba
  • Turvey, Calum G.

Abstract

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.

Suggested Citation

  • Shee, Apurba & Turvey, Calum G., 2008. "Commodity Linked Credit: A Risk Management Instrument for the Agrarians in India," Proceedings: 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48139, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  • Handle: RePEc:ags:nc1007:48139
    as

    Download full text from publisher

    File URL: http://purl.umn.edu/48139
    Download Restriction: no

    References listed on IDEAS

    as
    1. 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..
    2. 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.
    3. Myers, Robert J, 1992. "Incomplete Markets and Commodity-Linked Finance in Developing Countries," World Bank Research Observer, World Bank Group, vol. 7(1), pages 79-94, January.
    4. 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.
    5. Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, January.
    6. Turvey, Calum G. & Chantarat, Sommarat, 2006. "Weather-Linked Bonds," Proceedings: 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006; Washington, DC 133091, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    7. Calum G. Turvey, 2006. "Managing food industry business and financial risks with commodity-linked credit instruments," Agribusiness, John Wiley & Sons, Ltd., vol. 22(4), pages 523-545.
    8. Rajan, Raghuram, 1988. "Pricing commodity bonds using binomial option pricing," Policy Research Working Paper Series 136, The World Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agricultural Finance; Risk and Uncertainty;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:nc1007:48139. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://www.agfin.ifas.ufl.edu/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.