Track: Business Management

Abstract

This article discusses the use of a European type of put option called a cash-or-nothing put option to calculate the agricultural insurance premium price based on the rainfall index. The data used in this study are rainfall data and rice production in Banjarnegara Regency from 2014-2019 which are arranged in a quarterly form. The research was completed with a literature study and online secondary data search. From the research results, rainfall data with strong correlation is the second quarter rainfall (August - November) so that the rainfall data in August - November is used as the rainfall index. From the calculation results, at the 5th percentile, the rainfall in the second quarter is 16.66 mm. For 16.66 mm of rainfall, and using the reference of rainfall of 15.20 mm which is the last data on the rainfall index, the premium price is obtained of IDR 3,499,000. The calculation results provide a very large premium price, whereas the maximum benefit per hectare per planting season is IDR 6,000,000.