Essays in agricultural finance and risk management

The dissertation consists of three essays in agricultural finance and risk management. The essays apply innovative numerical techniques to several important issues ranging from optimal behavior of food processors to the provision of crop insurance.; The first essay presents a dynamic game model that captures the interaction between the processing capacity and oligopsonistic behavior of food processors. Unlike the conventional econometric approaches to oligopsony, the model incorporates a structural relationship between capacity, pricing decisions, and investment policies and takes into account the dynamic nature of capital management. Market power is calculated directly by comparing the optimal prices arising in the duopsony game with those in perfectly competitive and monopsony models. The effect of supply uncertainty on capacity and prices is analyzed. Spatial aspects of input supply distribution are also discussed. Numerical methods (orthogonal collocation) are used to compute and simulate the solution to the dynamic game.; The second essay presents economic analysis of the Standard Reinsurance Agreement (SRA), the document which governs the relationship between the Federal Crop Insurance Corporation and private insurance companies that deliver crop insurance products to farmers. The essay describes crop insurance products available to farmers, discusses the history of SRA and briefly outlines its provisions. It then presents the SRA Simulator, a tool designed to assist crop insurers and policymakers in assessing the economic impact of the Agreement. Finally, the simulator is used to analyze the effects of the SRA on the rates of return of private insurance companies as well as potential improvements in both the Agreement and the ways the companies allocate their books of business across different reinsurance funds.; The third essay discusses recent developments in catastrophe insurance products, securitization of correlated risks, and application of these innovations to provision of crop insurance. The essay presents an analytical framework for pricing index-based insurance contracts and addresses several issues arising in design of such contracts. The suggested methodology is then illustrated with a case study of Nicaraguan rainfall insurance contracts.