The value of foresight in the drybulk freight market

Vit Prochazka, Roar Adland and Stein Wallace

Transportation Research Part A: Policy and Practice, 2019, vol. 129, issue C, 232-245

Abstract: We analyze the value of foresight in the drybulk freight market when repositioning a vessel through space and time. In order to do that, we apply an optimization model on a network with dynamic regional freight rate differences and stochastic travel times. We evaluate the value of the geographical switching option for three cases: the upper bound based on having perfect foresight, the baseline set by a random strategy, and the case of perfect foresight but only for a limited time horizon. By combining a neural network with optimization, we can assess the impact of varying foresight horizons on economic performance. In a simple but realistic two-region case, we evaluate empirically that the upper bound for large vessels can be as high as 25% cumulative outperformance, and that a significant portion of this theoretical value can be captured with limited foresight of a few weeks. Our research sheds light on the important issue of spatial efficiency in global ocean freight markets and provides a useful upper bound for the value of investing in predictive analysis.

Keywords: Dry bulk market; Dynamic programming; Foresight (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0965856418312497
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The value of foresight in the drybulk freight market (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:transa:v:129:y:2019:i:c:p:232-245

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/supportfaq.cws_home/regional
https://shop.elsevie ... _01_ooc_1&version=01

DOI: 10.1016/j.tra.2019.07.003

Access Statistics for this article

Transportation Research Part A: Policy and Practice is currently edited by John (J.M.) Rose

More articles in Transportation Research Part A: Policy and Practice from Elsevier
Bibliographic data for series maintained by Catherine Liu ().