The market for insuring Insect damage is far from complete. This study introduces a new type of derivative instrument–insect derivatives–that provide growers a market-based means of transferring insect risk to speculators or others who may profit from higher insect populations. A risk-neutral valuation model is developed and applied to Bemisia tabaci population data. Economic simulation models show how insect derivatives can improve risk-return results for a representative cotton farm in the Imperial Valley of California. The results suggest that insect derivatives may become important risk management tools for a wide range of growers.
- Bemisia tabaci
- Forecasting models
- Risk management
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics, Econometrics and Finance (miscellaneous)