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Optimal cross hedging of insurance derivatives

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Revenue insurance accounts for more than half of all crop insurance policies (Figure 2). It began in 1997 as a buy-up option on a pilot basis for major crops. By 2003, acreage under revenue- based insurance exceeded acreage covered by APH policies. Revenue insurance combines the production guarantee component of crop insurance with a price guarantee to create a target revenue guarantee. Under revenue insurance programs, participating producers are assigned a target level of revenue based on market prices for the commodity and the producer’s yield history. A farmer who opts for revenue insurance can receive an indemnity payment when...
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Optimal cross hedging of insurance derivatives

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