Theses and Dissertations

Author

Sweta Tiwari

Issuing Body

Mississippi State University

Advisor

Coble, Keith H.

Committee Member

Harri, Ardian

Committee Member

Barnett, Barry J.

Committee Member

Ambinakudige, Shrinidhi

Date of Degree

1-1-2017

Document Type

Graduate Thesis - Open Access

Department

Department of Agricultural Economics

Abstract

Crop revenue insurance is an exception in the insurance industry offering a guarantee subsuming a highly systematic risk- price variability. This study examines whether crop insurance companies could use put and call options to hedge the price risk present in corn revenue insurance. The behavioral model used to examine hedging optimization behavior of a crop producer with crop insurance by Coble, Heifner, and Zuniga (2002) is modified to examine optimal hedge ratio of a company selling revenue insurance. The crop insurance summary of business from 1985-2015 for corn revenue policies was simulated. Corn futures prices were collected from the Commodity Research Bureau databases. Results show that net return from call and put options can hedge indemnities paid by corn RP and RP-HPE resulting from the price variability in some scenario. This suggests hedging the price risk of corn revenue insurance through options could be a viable practice for crop insurers.

URI

https://hdl.handle.net/11668/19956

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