Spatial-temporal model of insect growth, diffusion and derivative pricing

Timothy Richards, J. Eeaves, Mark Manfredo, S. E. Naranjo, C. C. Chu, T. J. Henneberry

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

Insect derivatives represent an important innovation in specialty crop risk management. An active over-the-counter market in insect derivatives will require a transparent pricing method. This paper develops an econometric model of the spatio-temporal process underlying a particular insect population and develops a pricing model based on this process. We show that insect derivatives can play an important risk management role in mitigating B. tabaci (whitefly) damage in cotton. Beyond developing a new risk management instrument, the key methodological contribution of this paper lies in pricing derivatives with stochastic properties in both space and time dimensions.

Original languageEnglish (US)
Pages (from-to)962-978
Number of pages17
JournalAmerican Journal of Agricultural Economics
Volume90
Issue number4
DOIs
StatePublished - 2008

Keywords

  • Derivatives
  • Invasive species
  • Risk management
  • Spatial econometrics

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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