RISK REDUCTION IN CORN PRODUCTION WITH WEATHER PUT OPTION

Since the late 1990s scientists have discussed the use of weather derivatives to hedge weather conditioned yield volatility in the agricultural sector. The hedging efficiency is depending on the contract design (Weather-Index, Strike-Level, Tick-Size). The basis risk consisting of the basis risk of production and the basis geographical risk, however, remain with the farmer. In this paper we quantify the risk reducing effect of rainfall put-options by applying a stochastic simulation. For this simulation we analyzed the yield data we obtained from corn producing farm located in the central part of Srem, Serbia. A nearby weather station contributed the meteorological data.


Subject(s):
Issue Date:
Oct 25 2012
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/139496
PURL Identifier:
http://purl.umn.edu/139496
Total Pages:
5




 Record created 2017-04-01, last modified 2019-08-29

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