Applications of Contingent Claims Theory to Microeconomic Problems

David A. Hennessy
July 1995  [95-M 7]

Suggested citation:

Hennessy, D.A. 1995. "Applications of Contingent Claims Theory to Microeconomic Problems." Monograph 95-M 7. Center for Agricultural and Rural Development, Iowa State University.


Hennessy first shows how to calculate the per acre benefit to producers participating in the Government Commodity Programs. This is valuable to policy makers seeking to determine when a set of program parameters is so severe that farmers would abandon the program, despite the potential environmental benefits from continued participation. In the second section of the book, Hennessy recommends futures markets as an avenue for producers to guarantee revenue by means of nonlinear futures contracts.