... understanding of the hedging effectiveness (HE) of the satellite-retrieved VH indices. Design/methodology/approach By using winter wheat yield records from 79 farms in Northern and Eastern Germany over 20 years, we designed index insurance based on three satellite indices to explore their HE: the Vegetation...

...-based EP are dominant agricultural activities will increase basis volatility, reducing hedging effectiveness. Expansion of the ethanol blending wall in the future may exacerbate the market forces that have evolved in local cash corn markets as EP renews its expansion in major corn production regions...

... their hedging performance. The purpose of this paper is to develop a new framework to derive the optimal hedging strategy and evaluate hedging effectiveness. Design/methodology/approach – This framework incorporates a stochastic temperature model, a crop yield model, a risk-neutral pricing method...

...Niels Pelka; Oliver Musshoff Purpose The use of weather derivatives is impaired with a basis risk which diminishes the hedging effectiveness and hinders the distribution of these risk management instruments in the agricultural sector. A frequently suggested approach to reduce the basis risk...

... insurance schemes by pay‐offs being related to objectively measurable weather variables. Due to the absence of individual farm yield time series, the hedging effectiveness of weather index‐based insurance is often estimated on the basis of aggregated farm data. The authors expect that there are differences...

... aggregation in the risk exposure and hedging instrument increases. © Emerald Group Publishing Limited 2008 Basis risk Hedging effectiveness Spatial aggregation Weather derivatives ...