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Index based compensation for weather risk in the Italian agriculture. A feasibility study based on actual historic data

Carlo Cafiero (), Federica Angelucci, Fabian Capitanio () and Michele Vollaro

No 9261, 101st Seminar, July 5-6, 2007, Berlin Germany from European Association of Agricultural Economists

Abstract: The paper explores the feasibility of the use of weather index based derivatives for farms' risk management in an Italian province. Based on a combination of detailed local weather data and of data on farms' yields, various possible weather indexes are found that are highly correlated with yields of the major crops in the area. Simulations show that hedging through such index based derivatives can be effective in protecting the stability of farms' incomes, at a cost that is likely to be much lower than that of the current system of subsidized crop insurance and ex-post compensation.

Keywords: Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 19
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa101:9261

DOI: 10.22004/ag.econ.9261

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