000097213 001__ 97213 000097213 005__ 20210819132514.0 000097213 0247_ $$aISSN 0002-1121$$2Other 000097213 0247_ $$2doi$$a10.22004/ag.econ.97213 000097213 037__ $$a670-2016-45625 000097213 037__ $$a670-2016-46179 000097213 041__ $$ager 000097213 242__ $$aWeather derivatives: a risk management tool in agriculture? 000097213 245__ $$aWetterderivate: Ein Instrument im Risikomanagement für die Landwirtschaft? 000097213 260__ $$c2005 000097213 269__ $$a2005 000097213 270__ $$mE.Berg@uni-bonn.de$$pBerg, Ernst 000097213 300__ $$a13 000097213 336__ $$aJournal Article 000097213 520__ $$aThe risks associated with farming activities are likely to increase in the future. It, therefore, appears worthwhile to analyse new risk management instruments. This paper investigates weather derivatives for which a market has already emerged in the USA. Contrary to traditional financial derivatives, their payoff is determined by future weather events, such as temperature or precipitation. Thus, they hedge risks which result from climate. Since they address production risks they are complementary to instruments that hedge price risks, such as future markets. The objective of the paper is to evaluate the economic impacts of weather derivatives and to assess their potential as farm level instruments of risk management. After outlining the main characteristics and the functioning of weather derivatives and their emergence, emphasis is placed on model calculations to quantify farm level impacts. The potato farm is used as a case study. Empirical data on yields and weather variables are taken from an experiment station of the Chamber of Agriculture at Hanover, Germany. After studying the relationship between yields and weather variables, the findings are used to design an option based on a precipitation index. Stochastic simulation is then used to assess the effects on the probability distribution of revenues. The results show that weather derivatives can be useful instruments of risk management in agriculture. Since there is still a lack of knowledge with respect to some of their economic impacts, further research is needed. This refers to the choice of suitable commodities and weather indexes, the contractual design and methodological aspects of pricing and of integrating weather derivatives into the risk management of farms. Last but not least, the question has to be answered, as to which partners would be willing to accept the risk that farmers intend to reduce by means of weather derivatives. 000097213 546__ $$aGerman 000097213 650__ $$aFinancial Economics 000097213 650__ $$aRisk and Uncertainty 000097213 6531_ $$aweather derivatives 000097213 6531_ $$aweather risk 000097213 6531_ $$arisk management 000097213 6531_ $$astochastic simulation 000097213 700__ $$aBerg, Ernst 000097213 700__ $$aSchmitz, Bernhard 000097213 700__ $$aStarp, Michael 000097213 700__ $$aTrenkel, Hermann 000097213 773__ $$q158$$o170$$tGerman Journal of Agricultural Economics$$j54$$k03$$d2005 000097213 8564_ $$9a55defc9-3759-4fb5-9ec1-88a109d18561$$s411650$$uhttps://ageconsearch.umn.edu/record/97213/files/3_Berg.pdf 000097213 887__ $$ahttp://purl.umn.edu/97213 000097213 909CO $$ooai:ageconsearch.umn.edu:97213$$pGLOBAL_SET 000097213 912__ $$nSubmitted by Klaus Salhofer (klaus.salhofer@tum.de) on 2010-11-27T11:25:29Z No. of bitstreams: 1 3_Berg.pdf: 411650 bytes, checksum: dd2b86556a9aa9eed6c9c8cafa8ff9f9 (MD5) 000097213 912__ $$nMade available in DSpace on 2010-11-27T11:25:30Z (GMT). No. of bitstreams: 1 3_Berg.pdf: 411650 bytes, checksum: dd2b86556a9aa9eed6c9c8cafa8ff9f9 (MD5) Previous issue date: 2005 000097213 913__ $$aLicense granted by Klaus Salhofer (klaus.salhofer@tum.de) on 2010-11-27T11:21:08Z (GMT): <center> <h2> Deposit Agreement </h2> </center> I represent that I am the creator of the digital material identified herein (&ldquo;Work&rdquo;). I represent that the work is original and that I either own all rights of copyright or have the right to deposit the copy in a digital archive such as AgEcon Search. I represent that in regard to any non-original material included in the Work I have secured written permission of the copyright owner (s) for this use or believe this use is allowed by law. I further represent that I have included all appropriate credits and attributions. I hereby grant the Regents of the University of Minnesota (&ldquo;University&rdquo;), through AgEcon Search, a non-exclusive right to access, reproduce, and distribute the Work, in whole or in part, for the purposes of security, preservation, and perpetual access. I grant the University a limited, non-exclusive right to make derivative works for the purpose of migrating the Work to other media or formats in order to preserve access to the Work. I do not transfer or intend to transfer any right of copyright or other intellectual property to the University. If the Deposit Agreement is executed by the Author�s Representative, the Representative shall separately execute the following representation: I represent that I am authorized by the Author to execute this Deposit Agreement on behalf of the Author. 000097213 980__ $$a670 000097213 982__ $$gGerman Journal of Agricultural Economics> Volume 54, Issue 3, 2005