This is a comprehensive book which covers the theoretical and practical aspects of managing financial risk in shipping as well as pricing and trading of different shipping derivatives instruments.In 2008, the size of the freight derivatives markets is estimated to be approximately 150 bn US$. This book provides a complete and thorough overview of the practicalities and functioning of this exciting market. The book discusses the use of forward freight agreements to manage freight rate risk; important issues that practitioners face in the market, such as basis and settlement risk are also covered with the use of practical examples. Nowadays shipping freight is commoditized and can be traded as an ordinary asset for speculation purposes. Therefore, the development and effectiveness of trading strategies for freight using technical and statistical analysis are also covered. The book also covers, for the first time, the topic of Freight options. We discuss how to price and trade freight options and present the relevant pricing methodologies; we also discuss techniques and strategies that traders may use in order to hedge option positions.Furthermore, a chapter is devoted to the area of freight risk analysis, estimation and modeling, which is extremely important given the recent changes and developments in shipping markets and, is a prerequisite for derivatives pricing and risk management. In addition to freight rate risk, the book also covers the entire spectrum of financial risks that shipping market practitioners face such as bunker risk, interest rate risk, ship price risk and credit risk. In all cases, the impact of those risks on shipping operations and the tools that can be used in their management are discussed extensively. The book also covers the topic of real options in shipping which includes all the options that are embedded in shipping operations, and presents examples of how to identify and evaluate such option. Finally, the book also discusses the application and uses of Value at Risk (VaR) in shipping including advanced topics on estimation of value at risk for FFA portfolios and freight options.This is a comprehensive book on shipping derivatives and risk management which covers the theoretical and practical aspects of financial risk in shipping. The book provides a thorough overview of the practice of risk management in shipping with the use of theoretical examples and real-life applications.
Introduction to Risk Management and Derivatives; Introduction to Shipping Markets; Statistical Tools for Risk Analysis and Modelling; Freight Market Information; Forward Freight Agreement; Technical Analysis and Freight Trading Strategies; Options on Air Freight Rates; Pricing and Risk Management of Option Positions; Value-at-Risk in Shipping and Freight Risk Management; Financial and Interest Rate Risk Management in Shipping; Credit Risk Measurement and Management in Shipping; Ship Price Risk and Risk Management; Real Options and Optionalities in Shipping.
