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osu1125587466.pdf (629.4 KB)
ETD Abstract Container
Abstract Header
Essays on using weather derivatives in dairy production
Author Info
Chen, Gang
Permalink:
http://rave.ohiolink.edu/etdc/view?acc_num=osu1125587466
Abstract Details
Year and Degree
2005, Doctor of Philosophy, Ohio State University, Agricultural, Environmental and Development Economics.
Abstract
Dairy farms confront unique risks from weather conditions. Hot and humid weather induces heat stress, which brings a series of risks to dairy farm operations including reductions in milk production and pregnancy rate and increases in cull rate and death rate. Traditional heat abatement technologies control the environment through ventilation, misting or evaporative cooling. Adoption of abatement equipment, however, is hindered by its high initial cost and possibly long payback period, especially for small- and medium-scale firms. Weather derivatives provide an alternative method of risk management for dairy producers. Instead of reducing production losses, weather derivatives make payments based upon observed weather conditions over a period of time so that they offer the potential to offset profit losses caused by adverse weather events. Chapter 2 tests the risk management value of weather derivatives acting as a substitute for traditional abatement technologies within a utility maximization framework. Previous research has identified the problem of basis risk in weather derivatives. Little theoretical or empirical work has been done to examine the effect of basis risk on weather derivatives. Chapter 3 examines the effect of basis risk in weather derivatives, and whether the existence of basis risk mitigates the usefulness of weather derivatives for dairy risk management. A decision that must regularly be made by a dairy farmer is when to maintain his abatement equipment and when to replace it. This decision affects both current and expected future revenues. Considering that weather derivatives can be purchased periodically, Chapter 4 tests the risk management value of weather derivatives for dairy producers and examines how weather derivatives can affect dairy producers’ abatement equipment decisions. In this chapter, I employ a dynamic programming framework to study the case that a representative dairy farmer maximizes his long-run utility using weather derivatives and abatement equipment.
Committee
Matthew Roberts (Advisor)
Keywords
Weather Derivatives
;
abatement equipment
;
THI
;
Weather
;
pro¿¿¿¿¿¿t
;
weather options
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Citations
Chen, G. (2005).
Essays on using weather derivatives in dairy production
[Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1125587466
APA Style (7th edition)
Chen, Gang.
Essays on using weather derivatives in dairy production.
2005. Ohio State University, Doctoral dissertation.
OhioLINK Electronic Theses and Dissertations Center
, http://rave.ohiolink.edu/etdc/view?acc_num=osu1125587466.
MLA Style (8th edition)
Chen, Gang. "Essays on using weather derivatives in dairy production." Doctoral dissertation, Ohio State University, 2005. http://rave.ohiolink.edu/etdc/view?acc_num=osu1125587466
Chicago Manual of Style (17th edition)
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Document number:
osu1125587466
Download Count:
1,371
Copyright Info
© 2005, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.