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Lecture 9 - Freight derivatives and risk management

Welcome

For this lecture, we will begin by identifying the sources of commercial and operational risks in shipping. We will delve into how these risks can be managed through operational decisions. Additionally, we will outline the different types of financial instruments available for hedging commercial risk.

In the second part of the lecture, we will continue describing some of the available options and conclude with strategies to potentially profit without owning vessels using financial instruments.

The lecture will end in a brief case study where participants will evaluate strategies for hedging freight levels based on market forecasts.

What you’ll learn from this lecture

  • Commercial risk factors in shipping
  • Risk control in an operational "traditional" way
  • Risk management in shipping
  • Freight derivatives

Learning Outcomes

Skills
  • Can communicate with industry practitioners using correct terminology
  • Can apply economic theory to varied strategic issues and practical problems facing shipping companies
  • Considers the economic, political, and ethical issues relevant to the shipping industries
Competency
  • Exchanges opinions and experiences with others with a background in the field
Knowledge
  • Understands the economic mechanisms driving the international shipping markets
  • Understands how to apply advanced economic models and concepts in international shipping industry.

Kavussanos, M. & Visvikis, I. D. (2008). Freight derivatives and risk management: A review. In H. Geman, Risk Management in Commodity Markets: From Shipping to Agriculturals and Energy (pp. 153-181). John Wiley & Sons, Incorporated

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