Theory and measurement of exotic options in US agricultural support programs

V. Tirupattur, R. J. Hauser, P. P. Boyle

Research output: Contribution to journalArticlepeer-review

Abstract

Theoretical models are derived for pricing derivative market instruments with payoff structures identical to those implied by the deficiency, Findley, and loan programs. Numerical approximation methods are used to obtain market premiums for the exotic contingent claims embedded in these types of programs. The application focuses on a comparison of the value of traditional support programs for corn to that of an exchange put offered under the Option Pilot Program. The comparison provides measures of expected cost to the government and of the value of the programs to the producer.

Original languageEnglish (US)
Pages (from-to)1127-1139
Number of pages13
JournalAmerican Journal of Agricultural Economics
Volume79
Issue number4
DOIs
StatePublished - 1997

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics

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