Abstract
Since unfavorable weather condition is the most important cause of loss in the gardening sector and apple production, it is necessary to provide a proper strategy for risk management to improve farm economic and social conditions. Insurance is a suitable tool to control such problems, while due to challenges, such as asymmetric information, it cannot manage these risks well. In this regard, it is logical to use the successful global approach in handling the weather-based index insurance, which can solve problems caused by asymmetric information, and can stabilize farmers’ income. Thus, in this research, we design the weather-based index insurance for the apple production in Damavand which is considered an important apple production center in Iran. Data were collected during 1987–2016 from Iranian Agriculture Jihad Organization and the meteorological station in Damavand County. To investigate the dependency structure between weather variables and yield, the C- and D-vine copulas are used, and the Bayesian approach is employed to estimate the copula parameters. Considering the derived expected loss from this dependency structure, the premium is 36162340.44 Rials, that is different from the premium of the current insurance. This diversity arises form circular and administrative of current plan and lack of consideration of expected loss in the premium determination.
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Appendix
Appendix
(a) Diagrams of posterior distribution of pair copulas’ parameters in C-vine
(b) Diagrams of posterior distribution of pair copulas parameters in D-vine
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Torabi, S., Dourandish, A., Daneshvar Kakhki, M., Kianirad, A., Mohammadi, H. (2020). Weather Risk Management: The Application of Vine Copula Approach. In: Rashidghalam, M. (eds) The Economics of Agriculture and Natural Resources. Perspectives on Development in the Middle East and North Africa (MENA) Region. Springer, Singapore. https://doi.org/10.1007/978-981-15-5250-2_5
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