Estimation of the Agricultural Probability of Loss: evidence for soybean in Paraná Stats

Vitor Augusto Ozaki, Ricardo Olinda, Priscila Neves Faria and Rogerio Costa Campos

Brazilian Journal of Rural Economy and Sociology (Revista de Economia e Sociologia Rural-RESR), 2014, vol. 52, issue 01, 16

Abstract: In any agricultural insurance program, the accurate quantification of the probability of the loss has great importance. In order to estimate this quantity, it is necessary to assume some parametric probability distribution. The objective of this work is to estimate the probability of loss using the theory of the extreme values modeling the left tail of the distribution. After that, the estimated values will be compared to the values estimated under the normality assumption. Finally, we discuss the implications of assuming a symmetrical distribution instead of a more flexible family of distributions when estimating the probability of loss and pricing the insurance contracts. Results show that, for the selected regions, the probability distributions present a relative degree of skewness. As a consequence, the probability of loss is quite different from those estimated supposing the Normal distribution, commonly used by Brazilian insurers.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rdecag:184576

DOI: 10.22004/ag.econ.184576

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