Empirical Analysis On The Functions Of The Freight Forward Agreement Market In International Dry Bulk Shipping

The fluctuation of ocean freight is the embodiment of market risk. During the past two years, the BDI soared from about 2000 to more than 10000.This put unprecedented pressure on the import and export companies in China. They need to know and master the risk management tool of ocean freight.The forward freight agreement is the most active ocean freight risk management tool. The main task of the thesis is to study the hedge function and price-discovery function of freight forward agreement market with econometric methods. The results show that the correlation coefficient between the spot price and FFA price is strong. The hedge function of the FFA market is not obvious. There is a cointegration relation between spot price and FFA price. The FFA price has a strong induction effect to spot price. The price-discovery function of the FFA market is obvious.In voyage charter line, the induction effect from spot price to FFA price is weak. In time charter line, when closer to the delivery date, the induction effect from spot price to FFA price becomes weak.Based on the result from the empirical analysis, the thesis explains why the BDI soared during the past two years and points out the necessary for China to participate in the FFA market and establish its own. The results of the thesis will provide the theoretical support to the FFA market participants and can give reference to the risk management of related industries.