Dependence Structure in Agricultural Index Insurance Design and Product Development

Bibliographic Details
Main Author:	Liu, Pu
Language:	English
Published:	The Ohio State University / OhioLINK 2010
Subjects:	Agricultural Economics
Online Access:	http://rave.ohiolink.edu/etdc/view?acc_num=osu1285015198

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spelling	ndltd-OhioLink-oai-etd.ohiolink.edu-osu12850151982021-08-03T06:00:46Z Dependence Structure in Agricultural Index Insurance Design and Product Development Liu, Pu Agricultural Economics <p>Index insurance refers to a broad class of insurance products that indemnify the insured based not on verifiable losses, but rather a distinct variable that ideally is highly correlated with losses, a so-called index. Index insurance products based on rainfall, area-yields, regional livestock mortality, remotely-sensed vegetation indices, and other variables have been promoted as cost-effective risk management tools for agricultural producers in developing countries where traditional insurance is likely to fail due to high transactions costs. Index insurance is generally free of moral hazard, is less susceptible to adverse selection, and is less expensive to administer than conventional insurance. Index insurance, however, has been criticized on the grounds that, in practice, available indices are not sufficiently correlated with losses to provide effective protection against common farm or household risks.</p><p>In this dissertation, various issues are addressed pertaining to statistical methods used in the development, design, and economic assessment of index insurance products. Of special interest is whether statistical methods commonly used by actuaries and economists to rate and analyze index insurance products can adequately capture the potentially complex dependence structures that might exist among indices and losses, particularly at the tails of the distributions. I propose a novel approach to statistical analysis of index insurance products based on copulas, and the spatial autoregressive model with variant spatial autoregressive parameters. Bivariate copulas are especially well-suited for capturing complex dependencies that exist among bivariate random variables, particularly at the tails, but have been rarely little used to analyze agricultural index insurance. The spatial autoregressive model with variant spatial autoregressive parameters is suited for characterizing tail dependence among multivariate random variables by introducing the effect of distances.</p><p>Three distinct applications are proposed. In Chapter 2 copulas and their properties are introduced. In Chapter 3, the degree of bivariate tail dependence that may exist among common indices will be assessed empirically, using bivariate copulas and Iowa county rainfall as a case study. In Chapter 4, how copulas can be used to design optimal index insurance products will be demonstrated, using Henan Province, China as a case study. In Chapter 5, I discuss how to investigate tail dependence among multivariate indices using spatial autoregressive error model.</p> 2010-11-02 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1285015198 http://rave.ohiolink.edu/etdc/view?acc_num=osu1285015198 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws.
collection	NDLTD
language	English
sources	NDLTD
topic	Agricultural Economics
spellingShingle	Agricultural Economics Liu, Pu Dependence Structure in Agricultural Index Insurance Design and Product Development
author	Liu, Pu
author_facet	Liu, Pu
author_sort	Liu, Pu
title	Dependence Structure in Agricultural Index Insurance Design and Product Development
title_short	Dependence Structure in Agricultural Index Insurance Design and Product Development
title_full	Dependence Structure in Agricultural Index Insurance Design and Product Development
title_fullStr	Dependence Structure in Agricultural Index Insurance Design and Product Development
title_full_unstemmed	Dependence Structure in Agricultural Index Insurance Design and Product Development
title_sort	dependence structure in agricultural index insurance design and product development
publisher	The Ohio State University / OhioLINK
publishDate	2010
url	http://rave.ohiolink.edu/etdc/view?acc_num=osu1285015198
work_keys_str_mv	AT liupu dependencestructureinagriculturalindexinsurancedesignandproductdevelopment
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Dependence Structure in Agricultural Index Insurance Design and Product Development

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