Risk Evaluation On Volatility Of Dry Bulk Ocean Freight Market

A systemic risk evaluation on volatility of ocean shipping freight market is proposed to look into shipping properties of long memory, extreme fluctuation, and correlation. With repect to the historical data series, the paper makes qualitative analysis and quantitative discussion about the performance and principles of volatility in shipping market.Firstly, the fractal market hypothesis is tested in dry bulk ocean shipping market, compared with the efficient market hypothesis, and proved to be a better framework for the study about dynamic behavior of participants and then freights. Long memory in ocean freight market is measured well using non-parametric and parametric methods, based on which a stochastic volatility model is implemented to evaluate the value at risk of freight daily returns in dry bulk ocean shipping.Secondly, the focus lies on feasibility of normal distribution hypothesis of freight daily returns and its tailed behavior that makes significant effects on extreme volatility in dry bulk ocean shipping. Moreover, the accurate asytomic distribution of freight daily returns is constructed and then applied to study the value at risk of dry bulk ocean shipping while extreme volatilities happen.Finally, risk evalution on dry bulk ocean shipping freight is exended from a single vessles type to multiple vessles types, which actually acts as the real shipping market. Hereby freight daily returns of two vessles types like Panamax and Capesize are covered by the theory of correlation and then concordance, other than which risks of a portfolio daily returns consisting of the two vessles type are simulated based on the long memory and extreme values specified above that results in an optimal ratio of investment on dry bulk ocean shipping vessles.The theoretical framework of risk evaluation on dry bulk ocean shipping freight market is set up from a few of different viewpoints to make instructive advices for operators and investors who can analyze the market more efficiently and make the decision more rationally.