Title: Revealing the freight market risk in Istfix shipping area

Authors: Gözde Ünal; Sinem Derindere Köseoğlu

Addresses: Department of International Trade, Boğaziçi University, Bebek 34342 Istanbul, Turkey ' The School of Transportation and Logistics, Istanbul University, Avcilar Campus, Avcilar, 34320, Istanbul, Turkey

Abstract: This study analyses the market risk of the freight rates of Istfix shipping area, where small coaster size of dry/general cargo mini bulkers ranging from 2,000 dwt to 12,000 dwt operate on Black Sea-Mediterranean-Continent routes. Having used VaR and expected shortfall as the market risk measures, we have found that the market risk is higher on longer routes in this region. However, the results do not suggest a significant relationship between the market risk of freight rates and that of coaster tonnages. Overall, the market risk in Istfix shipping area has been found to be much lower than in the international Baltic handysize index (BHSI), a proxy international index of relatively small sized vessels. The findings provide a better understanding of Istfix shipping area compared to BHSI for tramp market participants and speculators in freight derivatives markets for hedging and speculative purposes in their investment strategies and financial decision making processes.

Keywords: Istfix shipping area; Baltic handysize index; BHSI; value at risk; VaR; expected shortfall; market risk; freight rates; coaster size; shipping routes; Black Sea; Mediterranean; Continent; freight derivatives; hedging; speculation; investment strategies; financial decision making.

DOI: 10.1504/IJSTL.2014.064904

International Journal of Shipping and Transport Logistics, 2014 Vol.6 No.6, pp.593 - 610

Accepted: 14 Jun 2013
Published online: 27 Sep 2014 *

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