Freight Futures Markets

Fotis Giannakoulis, Nikos Gavriilidis and Nikolas Arachovas

Chapter 16 in The World Scientific Handbook of Futures Markets, 2015, pp 487-510 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Forward Freight Agreements or FFAs are futures contracts that allow shipping industry participants to trade in future level of freight rates. Freight is a physical commodity that, unlike others, cannot be stored. Therefore, the traditional arbitrage free model cannot be used for freight futures pricing. The pricing method used relies exclusively on the expectation of what the spot (underlying) freight price will be during the time of the settlement and, subsequently, the supply and demand for a contract at a specific price. This chapter aims to give an overview of the development of the freight futures market and describe pricing and trading strategies for hedging freight exposure both from the ship-owners' and shippers perspective. Given the limited history and depth of the container and tanker freight derivatives market, the focus of this chapter is primarily on the dry bulk futures.

Keywords: Futures Markets; Pricing; Risk Management; Futures Trading; Stock Indexes; Interest Rates; Futures Prices; Portfolio Theory; Hedge Funds; Foreign Exchange (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789814566926_0016 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789814566926_0016 (text/html)
Ebook Access is available upon purchase.

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:wsi:wschap:9789814566926_0016

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().