scholarly journals Market-based instruments for risk-averse farmers: rubber agroforest conservation in Jambi Province, Indonesia

2016 ◽  
Vol 22 (2) ◽  
pp. 133-155 ◽  
Author(s):  
Utkur Djanibekov ◽  
Grace B. Villamor
Keyword(s):  
Income Inequality ◽  
Risk Aversion ◽  
Real Options ◽  
Risk Averse ◽  
Variance Model ◽  
Income Uncertainty ◽  
Real Options Approach ◽  
Pigovian Taxes ◽  
Rubber Agroforest ◽  
Mean Variance

AbstractThis paper investigates the effectiveness of different market-based instruments (MBIs), such as eco-certification premiums, carbon payments, Pigovian taxes and their combination, to address the conversion of agroforests to monoculture systems and subsequent effects on incomes of risk-averse farmers under income uncertainty in Indonesia. For these, the authors develop a farm-level dynamic mean-variance model combined with a real options approach. Findings show that the conservation of agroforest is responsive to the risk-aversion level of farmers: the greater the level of risk aversion, the greater is the conserved area of agroforest. However, for all risk-averse farmers, additional incentives in the form of MBIs are still needed to prevent conversion of agroforest over the years, and only the combination of MBIs can achieve this target. Implementing fixed MBIs also contributes to stabilizing farmers’ incomes and reducing income risks. Consequently, the combined MBIs increase incomes and reduce income inequality between hardly and extremely risk-averse farmers.

Quantifying Gains To Risk Diversification Using Certainty Equivalence In A Mean-Variance Model: An Application To Florida Citrus

1990 ◽  
Vol 22 (2) ◽  
pp. 191-197 ◽  
Author(s):  
Allen M. Featherstone ◽  
Charles B. Moss
Keyword(s):  
Risk Aversion ◽  
Risk Averse ◽  
Fixed Costs ◽  
Variance Model ◽  
Marginal Benefit ◽  
Certainty Equivalence ◽  
Risk Diversification ◽  
Certainty Equivalents ◽  
Florida Citrus ◽  
Mean Variance

Abstract The marginal benefit and cost of diversification for Florida orange producers is analyzed using certainty equivalents. Results indicate that for moderate and high levels of risk aversion, diversification into strawberry, grapefruit, or additional orange production is not optimal. However, moderately risk averse Florida orange producers can gain by diversifying into grapefruit production if the annual amortized fixed costs can be reduced by as little as 10 percent.

scholarly journals Input Demand Under Joint Energy and Output Prices Uncertainties

2017 ◽  
Vol 34 (04) ◽  
pp. 1750018 ◽  
Author(s):  
Moawia Alghalith ◽  
Xu Guo ◽  
Cuizhen Niu ◽  
Wing-Keung Wong
Keyword(s):  
Risk Aversion ◽  
Absolute Risk ◽  
Comparative Statics ◽  
Energy Price ◽  
Risk Averse ◽  
Absolute Risk Aversion ◽  
Output Price ◽  
Input Demand ◽  
Mean Variance

In this paper, we analyze the impacts of joint energy and output prices uncertainties on the input demands in a mean–variance framework. We find that an increase in expected output price will surely cause the risk-averse firm to increase the input demand, while an increase in expected energy price will surely cause the risk-averse firm to decrease the demand for energy, but increase the demand for the non-risky inputs. Furthermore, we investigate the two cases with only uncertain energy price and only uncertain output price. In the case with only uncertain energy price, we find that the uncertain energy price has no impact on the demands for the non-risky inputs. We also show that the concepts of elasticity and decreasing absolute risk aversion (DARA) play an important role in the comparative statics analysis.

scholarly journals The Analysis of Portfolio Risk Management using VAR Approach Based on Investor Risk Preference

KINERJA ◽  
2017 ◽  
Vol 21 (2) ◽  
pp. 129 ◽  
Author(s):  
Agus Suwarno ◽  
Putu Anom Mahadwartha
Keyword(s):  
Value At Risk ◽  
Risk Preference ◽  
Risk Averse ◽  
Portfolio Risk ◽  
Variance Model ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Risk Taker ◽  
Mean Variance

Ackert and Deaves (2010) said that most people have tendency to being risk averse, but with appropriate amount of compensation, people may take more risk. Understanding those circumstances, this research trying to figure risk involved in a Mean-Variance Model. This model has taken consideration about investor risk preference in composed VAR model. VAR define as a measure of the risk of investments, which in this research focuses on risk preferences. This research also conducts comparison between optimum portfolio model known as Single Index Model and Mean-Variance Mode. Robustness test taken too analyze the outcomes from different data input. Research showed that risk preference has an impact on generating portfolio based on Mean-Variance Mode (MVM). Meanwhile, Single Index Model (SIM) found to given a similar result as MVM in high risk preference. This has shown that SIM may not adequate for those who have low risk preference. Research also show that risk taker investor get more gain and endure more risk than risk averse investor. But, based on robustness test, we found that the lowest risk an investor bear is on the highest risk preference. Thus, we make a conclusion that variance is not the only factor that might cause VaR increased, data dispersion has became more major factor.Keywords: Value at risk, Single Index Model, Optimum Portfolio.

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