Study On Freight Market Switching Of Combined Carriers Between Dry Bulk And Wet Bulk Shipping Market

Combined carrier refers to the ship which can be operated not only in the dry bulk shipping market but also in the wet bulk cargo shipping market. At present, many of combined carriers present by the OBO ship and the O/O ship body form, therefore, its operator has the option to deliver the combined carrier into the bulk cargo shipping market or the wet bulk cargo market. However, for one ship, choosing one market means inevitably to give up other. The study on freight market switching of combined carriers between dry bulk and wet bulk shipping market may help the operator to determine the best switching point and the strategy, to obtain the biggest profit. Because the shipping market is approximately a perfect competitive market which is full of the multitudinous uncertain factors. So this paper analyzes this matter by referring to the investment under uncertainty theory and setting up the real option model for market switching of the combined carriers.First this paper analyzes the definition, the characteristics, the fleet development history and the present situation of the combined carriers, and elaborates on the reasons for combined carrier fleet declining unifies with economical environments development, then analyzes its future development trend. Secondly, it uses the cointegration theory to analyze the cointegration relationships of the spot earnings of these two markets quantitatively which shows that spot earnings of dry bulk market and wet bulk market have the exclusive long-term stable relationships. That is a dynamical equilibrium relationship steady within a long term. On base of the long term relationship, a VEC model is built. The interaction mechanism of short-term fluctuation between dry bulk market and tank market is measured by it. The impulse response and variance decomposition result reveal that the effect from dry bulk market to wet bulk market is more serious than the opposite. Both long-term equilibrium model and VEC model illustrate the linear combination of the spot earnings of these two markets is steady. Finally, we study on the spot earnings differential of dry bulk market and wet bulk market. And it is expanded as an O-U process. Then a real option model of market switching for combined carriers is built, and actually used and taken sensitivity analysis.The market switching in shipping of the combined carriers is a complicated problem which involves various factors and is hard to find the common rules. This paper has solved the problem successfully by using ideas and methods of the real option. From the historical data simulation, we can witness that the real option model of market switching for combined carriers is able to give the switch time and the strategy accurately.