APPLICATION OF THE BLACK SCHOLES METHOD FOR COUNTING AGRICULTURAL INSURANCE PREMIUM PRICE BASED ON RAINFALL INDEX IN KAPUAS HULU REGENCY

  • Geby Marola Statistics Study Program, Faculty of Mathematics and Natural Sciences, Tanjungpura University, Indonesia
  • Neva Satyahadewi Statistics Study Program, Faculty of Mathematics and Natural Sciences, Tanjungpura University, Indonesia
  • Wirda Andani Statistics Study Program, Faculty of Mathematics and Natural Sciences, Tanjungpura University, Indonesia
DOI: https://doi.org/10.30598/barekengvol17iss2pp0819-0826
Keywords: Agricultural Insurancel, Rice Production, Black Scholes Method

Abstract

High-intensity rainfall is one of the factors that can interfere with the state of agriculture. Agricultural insurance is an insurance that can be used to reduce risks related to agricultural losses such as rice production. Climate-based agricultural insurance is a management of climate-related risks. This study aims to determine the rainfall index and calculate the value of agricultural insurance premiums based on the climate index (rainfall) in Kapuas Hulu Regency using the Black Scholes method. In calculating the value of agricultural insurance premiums based on the rainfall index, it starts by calculating the value of the correlation coefficient between rainfall and rice production. Then the value of the rainfall index is obtained, which then the value of the index is tested for lognormality to meet the assumptions on the Black Scholes method, after which it calculates the ln return value of the index value obtained, the last step is to calculate the value of agricultural insurance premiums. Based on case studies, the results obtained are when the risk-free interest rate is 3.5% and rainfall is 54.23 mm the premium paid is Rp 2,386,824 and when the rainfall is 75.39 mm the premium paid is Rp 3,898,142. If the risk-free interest rate is 4% and the bulk is 54.23 mm, the premium paid is IDR 2,383,842, and when the rainfall is 75.39 mm the premium paid is IDR 3,893,272. When the risk-free interest rate is 5% and rainfall is 54.23 mm the premium paid is Rp 2,377,890 and if the rainfall is 75.39 mm the premium paid is Rp 3,883,551. So, the higher the rainfall, the greater the premium value payment. If the risk-free interest rate gets bigger then the premium payment will be smaller.

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Published
2023-06-11
How to Cite
[1]
G. Marola, N. Satyahadewi, and W. Andani, “APPLICATION OF THE BLACK SCHOLES METHOD FOR COUNTING AGRICULTURAL INSURANCE PREMIUM PRICE BASED ON RAINFALL INDEX IN KAPUAS HULU REGENCY”, BAREKENG: J. Math. & App., vol. 17, no. 2, pp. 0819-0826, Jun. 2023.
Issue
Vol 17 No 2 (2023): BAREKENG: Journal of Mathematics and Its Applications
Section
Articles

Copyright (c) 2023 Geby Marola, Neva Satyahadewi, Wirda Andani

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