Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance

Thiagu Ranganathan () and Usha Ananthakumar
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Thiagu Ranganathan: University of Delhi (North Campus)
Usha Ananthakumar: Indian Institute of Technology Bombay

Journal of Quantitative Economics, 2017, vol. 15, issue 1, No 8, 171 pages

Abstract: Abstract This paper analyses hedging using price risk management instruments in presence of crop yield, crop revenue and rainfall insurance for soybean farmers in Dewas district of India. Using numerical simulations, we analyse the demand for hedging and performance of the hedging strategies involving futures, options and different insurance products. We also study the impact of risk aversion, biases in futures prices and transaction costs on various hedging strategies and potential benefits from these strategies. Results indicate that in most scenarios, farmer’s welfare (in terms of willingness to receive) is improved by using insurance products along with hedging.

Keywords: Hedging; Crop yield insurance; Crop revenue insurance; Rainfall insurance (search for similar items in EconPapers)
JEL-codes: D81 G11 Q13 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s40953-016-0041-8

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