Shipping risk management practice revisited: a new portfolio approach

Alexandridis, G., Sahoo, S., Song, D.-W. and Visvikis, I. (2018) Shipping risk management practice revisited: a new portfolio approach. Transportation Research Part A, 110. pp. 274-290. ISSN 0965-8564 doi: 10.1016/j.tra.2017.11.014

Abstract/Summary

The international shipping industry is susceptible to heightened market volatility manifested in significant freight rate fluctuations and thus diversifying and hedging the associated risks have become central to shipping business practice.Building on the extant literature on shipping freight derivatives, this study develops a portfolio-based methodological framework aiming to improve freight rate risk management. The study also offers, for the first time, evidence of the hedging performance of the recently developed container freight futures market. Our approach utilizes portfolios of container, dry bulk and tanker freight futures along with corresponding portfolios of physical freight rates in order to improve the efficacy of risk diversification for shipping market practitioners. The empirical findings uncovered in this study have important implications for overall business, commercial, and hedging strategies in the shipping industry, while they can ultimately lead to a more liquid and efficient freight futures market.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/74099
Identification Number/DOI	10.1016/j.tra.2017.11.014
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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