The stochastic seasonal behavior of freight rate dynamics

Javier Poblacion ()
Additional contact information
Javier Poblacion: D.G. Supervisión, Banco de España, c/ Alcalá 48, Madrid, 28014, Spain.

Maritime Economics & Logistics, 2015, vol. 17, issue 2, 142-162

Abstract: Previous studies on freight rate dynamics have explored the behavior of freight rates and their characteristics, including unit root, among other factors. However, there are few articles related to the stochastic process characterizing their dynamics. Moreover, to the best of the authors’ knowledge, there are no articles that incorporate seasonality in the freight rate dynamics. In the present article, we propose a factor model for the stochastic behavior of TCE (Time Charter Equivalent) and WS (World Scale) prices where one factor is a seasonal factor. In addition, based on this type of modeling, we study the seasonal behavior of freight rates and find that models allowing for stochastic seasonality outperform models with deterministic seasonality. Therefore, ship owners and charterers can accommodate their business strategies to the facts that (i) freight rates are higher in winter and spring than in the summer and autumn and that (ii) these differences are not deterministic but stochastic. These facts have also important implications in derivatives valuation and hedging.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.palgrave-journals.com/mel/journal/v17/n2/pdf/mel201437a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/mel/journal/v17/n2/full/mel201437a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
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:pal:marecl:v:17:y:2015:i:2:p:142-162

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/41278/PS2

Access Statistics for this article

Maritime Economics & Logistics is currently edited by Hercules E. Haralambides

More articles in Maritime Economics & Logistics from Palgrave Macmillan, International Association of Maritime Economists (IAME) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().