Pricing weather insurance with a random strike price : the Ontario ice-wine harvest

C.G. Turvey, Alfons Weersink, S.H.C. Chiang

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    21 Citations (Scopus)

    Abstract

    Weather insurance within the agricultural sector has been limited by the difficulty in defining the appropriate weather event and in pricing the product. We develop a new pricing method for weather insurance under situations where returns depend not only on the occurrence of the weather event, but also its timing. The method is used to price weather insurance for ice wine. Because the harvest quantity of grapes for ice wine degrades over time, the strike value on the weather event measured as harvestable hours is random. We develop a Monte Carlo method to estimate the premium.
    Original languageEnglish
    Pages (from-to)696-709
    JournalAmerican Journal of Agricultural Economics
    Volume88
    Issue number3
    DOIs
    Publication statusPublished - 2006

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