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Title

Hedging with Weather Derivatives to Cope with Climate Variability and Change in Grain Maize Production

Authors
Calanca, Pier-Luigi
Fuhrer, Jürg
Published in Agricultural Finance Review. 2008, vol. 68, p. 67-71
Abstract The effectiveness of hedging drought risks with weather derivatives was investigated for rain-fed grain maize production in Switzerland under current (1981-2003) and projected future (2070-2100) climatic conditions. Depending on location, hedging reduced the value-at- (VaR) measure to a variable degree, although with a considerable basis risk, but hedging may provide a valid risk transfer since loading of 90 per cent to 240 per cent of the fair premium can be paid to obtain a hedged situation with improved outcomes relative to the reference. However, the fair premium of a specific contract may vary by a factor of two to four over the 70-year period considered, which represents a substantial uncertainty for both the farmer and the institution writing the contract.
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Research groups ISE Pôle Sciences
ISE Climat
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TORRIANI, Daniele et al. Hedging with Weather Derivatives to Cope with Climate Variability and Change in Grain Maize Production. In: Agricultural Finance Review, 2008, vol. 68, p. 67-71. https://archive-ouverte.unige.ch/unige:18451

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Deposited on : 2012-02-20

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