This paper investigates the role of basis risk in decisions to buy derivatives that protect against drought risk. We conducted a discrete choice experiment on a sample of Ethiopian farmers. The results suggest that there is an inverted U-shaped relationship between the contractual frequency of severe drought and the market share of insurance. In other words, when the contractual frequency differs from the average perceived frequency, demand decreases. This relationship is not verified for moderate drought insurance. These findings point to the necessity to design insurance for moderate drought events and for risk aggregators that can diversify the idiosyncratic risk component.

(2015). Perceived basis risk and the heterogeneous demand for weather derivatives in Southern Ethiopia [journal article - articolo]. In SAVINGS AND DEVELOPMENT. Retrieved from http://hdl.handle.net/10446/77993

Perceived basis risk and the heterogeneous demand for weather derivatives in Southern Ethiopia

CASTELLANI, Davide
2015

Abstract

This paper investigates the role of basis risk in decisions to buy derivatives that protect against drought risk. We conducted a discrete choice experiment on a sample of Ethiopian farmers. The results suggest that there is an inverted U-shaped relationship between the contractual frequency of severe drought and the market share of insurance. In other words, when the contractual frequency differs from the average perceived frequency, demand decreases. This relationship is not verified for moderate drought insurance. These findings point to the necessity to design insurance for moderate drought events and for risk aggregators that can diversify the idiosyncratic risk component.
articolo
Castellani, Davide
(2015). Perceived basis risk and the heterogeneous demand for weather derivatives in Southern Ethiopia [journal article - articolo]. In SAVINGS AND DEVELOPMENT. Retrieved from http://hdl.handle.net/10446/77993
File allegato/i alla scheda:
File Dimensione del file Formato  
S&D_2015_39_01_01.pdf

accesso aperto

Versione: publisher's version - versione editoriale
Licenza: Licenza default Aisberg
Dimensione del file 341.96 kB
Formato Adobe PDF
341.96 kB Adobe PDF Visualizza/Apri
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

Aisberg ©2008 Servizi bibliotecari, Università degli studi di Bergamo | Terms of use/Condizioni di utilizzo

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/77993
Citazioni
  • Scopus 2
  • ???jsp.display-item.citation.isi??? ND
social impact