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Developing And Pricing Precipitation Insurance

Author

Listed:
  • Martin, Steven W.
  • Barnett, Barry J.
  • Coble, Keith H.

Abstract

Production agriculture and agribusiness are exposed to many weather-related risks. Recent years have seen the emergence of an increased interest in weather-based derivatives as mechanisms for sharing risks due to weather phenomena. In this study, a unique precipitation derivative is proposed that allows the purchaser to specify the parameters of the idemnity function. Pricing methods are presented in the context of a cotton harvest example from Mississippi. Our findings show a potential for weather derivatives to serve niche markets within U.S. agriculture.

Suggested Citation

  • Martin, Steven W. & Barnett, Barry J. & Coble, Keith H., 2001. "Developing And Pricing Precipitation Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), pages 1-14, July.
    • Handle: RePEc:ags:jlaare:31155
    DOI: 10.22004/ag.econ.31155
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    References listed on IDEAS

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