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On the Premium for Revenue Insurance under Joint Price and Yield Risk

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Publication date
13/07/2004
Number of Pages
18
Language:
English
Type of Publication:
Studies
Focus Region:
Global
Focus Topic:
Institutions / Organizations
Market / Trade
Type of Risk:
Policy & institutional
Type of Risk Managment Option:
Risk transfer
Risk assessment
Commodity:
Crops
Author
Alexander E. Saak
Organization
Center for Agricultural and Rural Development (CARD)

The goal of this paper is to analyze how increased dependence between multiplicative risks affects the actuarially fair value of an individual insurance policy. The primary example is agricultural revenue insurance that insures gross crop revenue defined as the product of random price and yield, which are prone to be negatively correlated. Premiums for revenue insurance and the corresponding yield insurance policy are also compared.