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Evaluation of an index-based risk management contract for agricultural activities

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  • Weynants, Stephanie
  • Gaspart, Frederic
  • Frahan, Bruno Henry de

Abstract

This paper proposes and evaluates area index-based financial contracts for specific farm activities. These financial contracts allow not only for removing moral hazard and adverse selection as index insurances do, but also for adding more flexibility and, hence, better risk protection. The evaluation of these financial contracts uses FADN farm data of Belgium from 1990 to 2007. Area indexes based on yield and yield-in-value perform well in stabilising revenues from some farm activities, but badly from some others. The variation in the estimated actuarially fair premiums across agricultural area shows the importance of designing those financial contracts according to homogenous agricultural area.

Suggested Citation

  • Weynants, Stephanie & Gaspart, Frederic & Frahan, Bruno Henry de, 2012. "Evaluation of an index-based risk management contract for agricultural activities," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122483, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaa123:122483
    DOI: 10.22004/ag.econ.122483
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    References listed on IDEAS

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    1. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
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    Risk and Uncertainty;

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