| Registro completo |
| Provedor de dados: |
AgEcon
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| País: |
United States
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| Título: |
Basis Risk and Weather Hedging Effectiveness
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| Autores: |
Woodard, Joshua D.
Garcia, Philip
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| Data: |
2007-07-27
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| Ano: |
2007
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| Palavras-chave: |
Weather Derivatives
Basis Risk
Spatial Aggregation
Insurance
Hedging Effectiveness
Agricultural Finance
Marketing
Risk and Uncertainty
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| Resumo: |
Basis risk has been cited as a primary concern for implementing weather hedges. This study investigates several dimensions of weather basis risk for the U.S. corn market at various levels of aggregation. The results suggest that while the degree of geographic basis risk may be significant in some instances, it should not preclude the use of geographic cross-hedging. In addition, the degree to which geographic basis risk impedes effective hedging diminishes as the level of spatial aggregation increases. In fact, geographic basis risk is actually negative in the case most representative of a reinsurance hedge, and the reduction in risk from employing straightforward temperature derivatives is significant. Finally, precipitation hedges are found to introduce additional product basis risk. The findings may be of interest to decision makers considering using exchange traded weather derivatives to hedge agricultural production and insurance risk.
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| Tipo: |
Conference Paper or Presentation
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| Idioma: |
Inglês
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| Identificador: |
26950
http://purl.umn.edu/9254
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| Editor: |
AgEcon Search
|
| Relação: |
European Association of Agricultural Economists>101st Seminar, July 5-6, 2007, Berlin Germany
Seminar Paper
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| Formato: |
37
application/pdf
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