German hog production responds only very limited to price fluctuations in the pork market. The hog production concentrates in a few regions though it does not depend on special natural conditions. Furthermore, the production volume does hardly vary over time. Relatively high market risks, sunk...

Applications of the real options approach hardly consider investment returns to be the result of competitive markets such as markets for agricultural products. The reason is probably that Dixit and Pindyck (1994, ch. 8) show in their very popular book "Investment under Uncertainty" that the...

This article develops an Indifference Pricing model for a weather derivative that is traded over the counter. The model is used to calculate ask and bid prices for a put option on a weather index in Germany. We find that under moderate risk aversion the maximal bid prices of grain producers...

This paper gives an overview of simulation based procedures, which have proved to be efficient in valuing American options and therefore real options. Many of them integrate sequential stochastic simulations in the backward recursive programming approach to determine the early-exercise frontier....

In this paper we price a precipitation option based on empirical weather data from Germany using different pricing methods, among them the burn analysis, index value simulation and daily simulation. For that purpose we develop a daily precipitation model. Moreover, a decorrelation analysis is...

Since the mid-1990s, agricultural economists have discussed the relevance of index-based insurances, also called “weather derivatives”, as hedging instruments for volumetric risks in agriculture. Motivated by the question of how weather derivatives should be priced for agricultural firms,...

Die Effizienzanalyse mit Hilfe der Data-Envelopment-Analyse (DEA) stellt ein weit verbreitetes Verfahren zur vergleichenden Einschätzung der empirischen Performanz von Entscheidungseinheiten (z.B. Unternehmen) dar. Angesichts „boomender“ Anwendungen auf eine Vielzahl...

Purpose – Maize production in China is exposed to pronounced yield risks, in particular weather risk, which is one of the most important and least controllable sources of risk in agriculture. The purpose of this paper is to analyze the extent to which weather index-based insurance can...