Managing economie risk caused by insects: Bug options

Timothy Richards; James Eaves; Valerie Fournter; S. E. Naranjo; C. C. Chu; T. J. Henneberry

doi:10.1108/00214660680001178

Managing economie risk caused by insects: Bug options

Timothy Richards, James Eaves, Valerie Fournter, S. E. Naranjo, C. C. Chu, T. J. Henneberry

Agribusiness, Morrison School of

Research output: Contribution to journal › Article › peer-review

8 Scopus citations

Abstract

The market for insuring Insect damage is far from complete. This study introduces a new type of derivative instrument–insect derivatives–that provide growers a market-based means of transferring insect risk to speculators or others who may profit from higher insect populations. A risk-neutral valuation model is developed and applied to Bemisia tabaci population data. Economic simulation models show how insect derivatives can improve risk-return results for a representative cotton farm in the Imperial Valley of California. The results suggest that insect derivatives may become important risk management tools for a wide range of growers.

Original language	English (US)
Pages (from-to)	27-45
Number of pages	19
Journal	Agricultural Finance Review
Volume	66
Issue number	1
DOIs	https://doi.org/10.1108/00214660680001178
State	Published - May 5 2006

Keywords

Bemisia tabaci
Cotton
Derivatives
Forecasting models
Insects
Insurance
Risk management

ASJC Scopus subject areas

Agricultural and Biological Sciences (miscellaneous)
Economics, Econometrics and Finance (miscellaneous)

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10.1108/00214660680001178

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AU - Eaves, James

AU - Fournter, Valerie

AU - Naranjo, S. E.

AU - Chu, C. C.

AU - Henneberry, T. J.

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AB - The market for insuring Insect damage is far from complete. This study introduces a new type of derivative instrument–insect derivatives–that provide growers a market-based means of transferring insect risk to speculators or others who may profit from higher insect populations. A risk-neutral valuation model is developed and applied to Bemisia tabaci population data. Economic simulation models show how insect derivatives can improve risk-return results for a representative cotton farm in the Imperial Valley of California. The results suggest that insect derivatives may become important risk management tools for a wide range of growers.

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KW - Forecasting models

KW - Insects

KW - Insurance

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Managing economie risk caused by insects: Bug options

Abstract

Keywords

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