Managing economie risk caused by insects: Bug options

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

Research output: Contribution to journalArticlepeer-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 languageEnglish (US)
Pages (from-to)27-45
Number of pages19
JournalAgricultural Finance Review
Volume66
Issue number1
DOIs
StatePublished - 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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