Hedging crop risk with yield insurance futures and options

Area Yield Futures and Futures Options: Risk Management and Hedging

Imagine there exist markets for yield futures contracts as well as ordinary price futures contracts. • Intuitively one would think that a combined use of yield futures contracts and price futures contracts ought to provide a reasonable strategy for insuring revenue. • In the paper this idea is made precise. It is shown that revenue can be secured in by a combined replication of these two contra...

Hedging Downside Risk: Futures versus Options

Hedging Price Risk in the Presence of Crop Yield and Revenue Insurance

The demand for hedging against price uncertainty in the presence of crop yield and revenue insurance contracts is examined for French wheat farms. The rationale for the use of options in addition to futures is first highlighted through the characterization of the first-best hedging strategy in the expected utility framework. It is then illustrated using numerical simulations. The presence of op...

Hedging Price Risk in the Presence of Crop Yield and Revenue Insurance by

The demand for hedging against price uncertainty in the presence of crop yield and revenue insurance contracts is examined for French wheat farms. The rationale for the use of options in addition to futures is first highlighted through the characterization of the first-best hedging strategy in the expected utility framework. It is then illustrated using numerical simulations. The presence of op...

Optimal Hedging with Options and Futures against Price Risk and Background Risk

On the condition that both futures and options exist in the markets for hedging, this paper examines the optimal hedging strategy under price risk and background risk. Compared with the previous research, which has studied options hedging against basis risk and production risk being extended to options and futures hedging against price risk and background risk, we proposed a model and have take...