• Corpus ID: 244130134

Optimal index insurance and basis risk decomposition: an application to Kenya

  title={Optimal index insurance and basis risk decomposition: an application to Kenya},
  author={Matthieu Stigler and D. Lobell},
Index insurance is a promising tool to reduce the risk faced by farmers, but high basis risk, which arises from imperfect correlation between the index and individual farm yields, has limited its adoption to date. Basis risk arises from two fundamental sources: the intrinsic heterogeneity within an insurance zone (zonal risk), and the lack of predictive accuracy of the index (design risk). Whereas previous work has focused almost exclusively on design risk, a theoretical and empirical… 
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