Option values for provisions in export credit guarantees

All major exporting countries of agricultural commodities have some form of credit guarantee program. As the importance of credit programs escalates, it is incumbent on policy makers to examine the value of their program rela tive to those of competitors. In this study, a model based on option pricin g theory was developed to estimate the value of credit guarantees extended to importers and applied to U.S. and competing countries' programs. The Can adian guarantee has the lowest implicit value, followed by the U.S., Austra lian, and French guarantees. French guarantees had the highest implicit val ue due to higher coverage for interest and freight and insurance.