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Hedging dairy production losses using weather‐based index insurance
Author(s) -
Deng Xiaohui,
Barnett Barry J.,
Vedenov Dmitry V.,
West Joe W.
Publication year - 2007
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/j.1574-0862.2007.00204.x
Subject(s) - index (typography) , product (mathematics) , heat index , production (economics) , business , risk management , actuarial science , basis risk , heat stress , agricultural science , agricultural economics , environmental science , economics , humidity , finance , meteorology , computer science , microeconomics , geography , mathematics , geometry , capital asset pricing model , atmospheric sciences , geology , world wide web
This article proposes a temperature–humidity index insurance product and examines whether this product can effectively protect against the risk of reduced milk production caused by heat stress. Results suggest that even when premiums are at higher than actuarially fair levels and the insurance purchaser is faced with both spatial and temporal basis risks, a temperature–humidity index insurance product would provide risk management benefits to a representative south‐central Georgia dairy producer.