The Application Of Ffa For Evading Risk In The Dry Bulk Shipping Market

The international shipping market stems from the derivative demand of the world economics trade, however the shipping demand's derivation leads to the passivity and the dependence of the shipping production, especially the international dry bulk shipping market almost belongs to the perfect competitive market structure completely. The international dry bulk shipping market effected by various countries' politics and the economic development, the international cargo supply-demand relation, the shipping market is congenial and monopoly, artificial, weather, fuel oil price, natural condition change and so on, so that the BDI index the fluctuate acutely, the market participants are confronted with all kinds of risks, to mitigate risks, the market participants take a great many methods of risk management to mitigate the market risk. In order to mitigate the risk which caused by the fluctuation of freight rates, many shipping companies and the cargo owners choose the freight market derivatives to carry on the hedge.Among them, Forward Freight Agreements (FFA) prove the overwhelming superiority in the transaction occupies. As one kind of effective marine transportation risk management tools, FFA is provided with many functions, such as the hedge, the price discovery and congenial and so on..It had already made the very good progress in the function research field of FFA (hedge, price discovered, congenial).But in the present research, considering the possibility in the actual operation for the enterprises, Risk avoidance in the use of FFA, because not a good prediction of the BDI, which has led shipping companies in the FFA during the actual operation of a lot of uncertainty, it ultimately led to FFA fails when the risk aversion, Therefore, from this point to start this article, the use of prediction models to predict the BDI index, and then explore the use of FFA for the possibility of risk aversion.In this article, firstly, it elaborates the definition of FFA, the production mechanism of shipping risk and the basic principle that FFA mitigates risks systematically, what's more, it analyzes the Baltic Sea freight index as well as its computational method, besides, it predicts the tendency of BDI which is an important way to mitigate risks in dry bulk shipping market. It makes the FFA theory application present situation and the existence question clear and definite,through analyzing domestic and foreign practice about FFA.Finally, it puts forward several proposals to our country in participating FFA, which is based on the above theoretical analysis foundation.