Dynamics of the Term Structure and Volatility of Shipping Freight Rates

Dynamics of the Term Structure and Volatility of Shipping Freight Rates

This paper investigates the relationship between the dynamics of the term structure and time-varying volatility of shipping freight rates. Using a dataset covering the period from January 1992 to September 2007 and augmented EGARCH models, we find support for the argument that the volatility of frei...

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Veröffentlicht in:Journal of transport economics and policy 2011-01, Vol.45 (1), p.105-128
Hauptverfasser: Alizadeh, Amir H., Nomikos, Nikos K.
Format: Artikel
Sprache:eng
Schlagworte:
Analytical forecasting
Correlation analysis
Forecasting models
Freight
Freight forwarding
GARCH models
Market analysis
Market conditions
Oil tankers
Risk management
Sea transport
Shipping
Statistical variance
Stochastic models
Studies
Supply and demand
Tankers
Transport economics
Transport infrastructure
Transportation economics
Volatility
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Beschreibung
Zusammenfassung:This paper investigates the relationship between the dynamics of the term structure and time-varying volatility of shipping freight rates. Using a dataset covering the period from January 1992 to September 2007 and augmented EGARCH models, we find support for the argument that the volatility of freight rates is related to the shape of the term structure of the freight market. Furthermore, it is found that this relationship is asymmetric in the sense that when the freight market is in backwardation, volatility is higher compared to periods when the market is in contango. The results have important implications for freight risk analysis and management.
ISSN:0022-5258
1754-5951