Empirical Analysis On The Validity Of Hedge Of The Shipping Price Market In Dry Bulk Shipping

The volatility of freight is a reflection of shipping market risk. From 2003, the BDI has soared from 2000 points to more than 10,000 points, after that, it dropped from 10,000 points to 1,000 points. Within such a large price fluctuation, China's import and export trade enterprises are under unprecedented pressure. Therefore, related enterprises in China need urgently to understand and grasp the freight risk management tools, in order to use them of avoiding risk and hedge. This paper is researched in the context of such a circumstance.This article's main task is to use econometric methods to study empirically the effectiveness of the optimal hedging in the forward freight market by using a typical route as an example. The results show that the correlation coefficient between forward freight prices and spot prices is high, forward freight price is playing a guiding role to lead spot price to change. This paper use minimum variance hedging model, bring in Kendall's rank correlation model, Copula model and GED-GARCH model to estimate the ratio of forward freight and spot price after hedging in use of BCI, BPI, BSI three routes, and moreover, the results of estimating hedging are satisfactory. Finally, by comparing the time series between before and after hedging the price, through analyzing the hedging effectiveness, it can be concluded that using the Tail Dependence to calculate the rate sequence of return after hedging has a smaller mean and variance, and its fluctuations are much more moderate than before hedging, so it prove hedging function is very effective.Forward Freight Agreement is the most active freight risk management tools. Based on empirical analysis, it has been pointed out the importance of the active involvement of China dry bulk cargo transportation enterprises and the construction of forward freight market, besides, the paper also has put forward concrete proposals. In this paper, the results of research provide a theoretical basis for domestic enterprises to participate in forward freight market and have a certain reference value in risk management in shipping-related industries.