Research On Pricing Crop Revenue Insurance Based On Copula Model

As an ancient saying goes,"People regard food as their heaven."Food security has always been the fundamental and vital foundation of national stability.General Secretary Xi Jinping has pointed out that food security is a national strategy of China.No matter what level of social and economic development,we must ensure that China’s food production can basically achieve selfsufficiency.With the global political and economic instability,the worldwide Covid-19 pandemic outbreak and the global warming climate change,all these challenges have had an enormous influence on national productive capacity and people’s lives.During the long-term struggle against the pandemic,guaranteeing economic and social stability,alleviating poverty,promoting rural revitalization,doing a good job in work related to agriculture,rural areas and farmers,vigorously developing the agricultural insurance,improving the agricultural production security system and guaranteeing increased production and revenue is an important task of our country.Agricultural insurance provides a solution to avoid the risks in agricultural production activities,while crop income insurance has more practical significance to guarantee the income of farmers because of its characteristics of protecting both price and yield,and will also be an important direction of the development of agricultural insurance in China.Therefore,this paper aims to study the pricing of crop income insurance based on the Copula model,so as to provide theoretical support for realizing the full coverage of agricultural insurance of three major grain crops in counties in the major grain-producing provinces.In this paper,the yield of corn(per unit area),the corn futures price and the rainfall index from April to August(corn planting period)of 16 cities in Shandong Province from 2005 to 2020 are selected as research samples.The income insurance rate is determined based on the Copula function.Firstly,the marginal distributions of yield per unit area in 16 cities are obtained by the density ratio model respectively,and the marginal distributions of crop price and rainfall are obtained by the parameter method.Secondly,considering only price and yield,estimate the premium rates based on the single Copula model and Vine Copula model respectively and analyze the fitting effect of the two models.Then,the rainfall index is added to the Vine Copula model,and the income insurance premium rate is estimated based on the three variables.Finally,according to relevant research,new income insurance is proposed which is based on both real income and rainfall index.This kind of insurance will consider both rainfall and farmer’s income to determine the guaranteed amount.The paper draws the following conclusions:First,the correlation between yield and price has a significant impact on the calculation of the premium rate of income insurance.Second,the density ratio model does better in fitting corn yield marginal distribution in a small sample situation.Third,the Vine Copula model performs better than the single Copula model.Fourth,a new type of income insurance based on the rainfall index provides a new option for income insurance.