The assignment basically is to take a quick look at the attached then answering the following questions. Please do not write the whole question, just the number of each question. The solution has to be in two-three pages, one paragraph for each question, try to be brief and concise. I have to hand it out April 15 at 10 am, do not be late, please.
Thank you all
(1) How could they structure a weather derivative to cover the exposure? More specifically, what would be the underlying index? Would they need a separate contract for each crop and each province?
(2) How could they structure an insurance contract to cover the grain volume exposure? More specifically, how would a loss be defined? And, what would be the payment to UGG conditional on a loss?
(3) What are the advantages and disadvantages of integrating the grain volume coverage with the firm’s other insurance coverages? That is, instead of having separate policies with separate deductibles and limits for the various exposures (including the grain volume exposure), what are the advantages and disadvantages of bundling all of the firm’s exposures in one policy with one deductible and one limit?
(4) Ignoring cost differences, are there any advantages of the insurance contract approach versus the use of weather derivatives?
|Due By (Pacific Time)
||04/15/2015 09:00 am