Livestock Revenue Insurance

Chad Hart (), Bruce Alan Babcock and Dermot James Hayes ()

Staff General Research Papers from Iowa State University, Department of Economics

Abstract: (Revised) This paper outlines several possible structures for livestock revenue insurance. The policies take the form of an exotic option--an Asian basket option. The actuarially fair premiums for these policies are equal to the prices of the options they represent. Due to the complexity of pricing Asian basket options, we have combined two techniques for pricing options to reach the actuarially fair premiums. Projected premiums, producer welfare, and program efficiency are evaluated for the insurance products and existing market tools. Using efficiency ratios and certainty equivalent returns, we compare the insurance policies to strategies involving existing futures and options.

New Economics Papers: this item is included in nep-agr and nep-ias
Date: 2001-01-01
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Published in Journal of Futures Markets, June 2001, vol. 21 no. 6, pp. 553-580

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Persistent link: http://EconPapers.repec.org/RePEc:isu:genres:1932

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