Livestock Revenue Insurance

This study outlines several possible structures for livestock revenue insurance. The policies take the form of an exotic option—an Asian basket option. The actuarially fair premiums for these policies are equal to the prices of the options they represent. Due to the complexity of pricing Asian basket options, we have combined two techniques for pricing options to reach the actuarially fair premiums. Projected premiums, producer welfare, and program efficiency are evaluated for the insurance products and existing market tools. Using efficiency ratios and certainty equivalent returns, we compare the insurance policies to strategies involving existing futures and options.


Issue Date:
2000
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/18356
Total Pages:
34
Series Statement:
CARD Working Paper 99-WP 224




 Record created 2017-04-01, last modified 2017-04-04

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