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- Publisher
- Emerald Publishing
- Copyright
- Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
- ISSN
- 0002-1466
- DOI
- 10.1108/00214660880001225
- Publisher site
- See Article on Publisher Site
Abstract
This paper illustrates how weather derivatives indexed to forecasts of famine can be designed and used by operational agencies and donors to facilitate timely and reliable financing, for effective emergency response to climate‐based, slow‐onset disasters such as drought. We provide a general framework for derivative contracts, especially in the context of index insurance and famine catastrophe bond, and show how they can be used to complement existing tools and facilities in drought risk financing through a risk‐layering strategy. We use the case of arid lands of northern Kenya, where rainfall proves a strong predictor of widespread and severe child wasting, to provide a simple empirical illustration of the potential contract designs.
Journal
Agricultural Finance Review – Emerald Publishing
Published: May 5, 2008
Keywords: Catastrophe bond; Covariate risk; Famine relief; Food aid; Food insecurity; Kenya; Pastoralists; Weather derivatives