RISK REDUCTION IN CORN PRODUCTION WITH WEATHER PUT OPTION

Todor Markovic, Aleksandra Martinovska-Stojcheska and Sanjin Ivanovic

No 139496, 132nd Seminar, October 25-27, 2012, Skopje, Republic of Macedonia from European Association of Agricultural Economists

Abstract: 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.

Keywords: Farm; Management (search for similar items in EconPapers)
Pages: 5
Date: 2012-10-25
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa132:139496

DOI: 10.22004/ag.econ.139496

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