This paper compares alternative ways of conducting a farm risk analysis using sparse data with a special reference to catastrophe events. For this purpose kernel and multivariate normal smoothing procedures are proposed and applied to generate (simulate) the joint distributions of crop yields and prices. The analysis showed that the functional forms chosen to generate the joint distribution substantially impacted the density in the tail of the distribution, although they were parameterised with the same data. The differences in the optimal farm plan (i.e. activity levels) resulting from the optimisation of net farm income, obtained from a utility-efficient programming model, were less profound.
|Title of host publication||Handbook of Operations Research in Agriculture and the Agri-Food Industry|
|Editors||Lluis M. Plà-Aragone|
|Place of Publication||New York|
|Publisher||Springer New York LLC|
|Publication status||Published - 2015|
|Name||International Series in Operations Research & Management Science|