A DERIVATIVE SECURITY APPROACH TO SETTING CROP REVENUE COVERAGE INSURANCE PREMIUMS

Jeffrey Stokes

Journal of Agricultural and Resource Economics, 2000, vol. 25, issue 01, 18

Abstract: The nature of indemnities and reliance on futures price averaging during two distinct time intervals throughout the production year imply Crop Revenue Coverage (CRC) insurance behaves like an exotic put option. Treating this type of insurance as a derivative security, an analytical model is developed and an algorithm for solving the model to place a lower bound on insurance premiums is presented. Monte Carlo simulation, taking into account the path-dependent nature of an Asian-type option, is then used to determine lower-bound estimates for insurance premiums on corn gross revenue under specified price and yield distributions.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Date: 2000
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://ageconsearch.umn.edu/record/30839/files/25010159.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:30839

DOI: 10.22004/ag.econ.30839

Access Statistics for this article

More articles in Journal of Agricultural and Resource Economics from Western Agricultural Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().