Enterprise-level risk assessment of geographically diversified commercial farms: a copula approach

Ryan Larsen (), Dmitry Vedenov and David Leatham ()

No 46763, 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia from Southern Agricultural Economics Association

Abstract: As agriculture becomes more industrialized, the role of risk measures such as value-at-risk (VaR) will become more utilized. In this case it was applied to geographical diversification and also modifying the traditional VaR estimation by incorporating a copula dependence parameter into the VaR estimation. In addition, an alternative risk measure was also calculated, CVaR. The CVaR, unlike VaR, is a coherent risk measure. Thus it does not suffer from many of the shortcomings of the VaR. The land portfolio consisted of Dryland wheat production acres in Texas, Colorado, and Montana. Three series of net returns were calculated for each region. Based on the VaR and the CVaR, the portfolio was optimized based on minimizing the expected loss based on historical net revenues. The results showed that diversification could be reduced by producing in all three areas.

Keywords: Agribusiness; Farm Management; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 17
Date: 2009
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saeana:46763

DOI: 10.22004/ag.econ.46763

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