Empirical Study On Hedging Efficiency Of International Dry Bulk Freight

With the development of world economy and international trade,the volume of world sea transportation is increasing.According to the related news,sea transportation ,which always accounts for 90% of the global volume,is playing an important role in the world economy and trade.International dry bulk shipping is the main part of maritime market.However,the volatility of freight is a reflection of shipping market risk.From2003,the BDI has soared from 2000 point to the highest point in May 2008 more than11700 points. After that,it dropped to more than 600 points,with the influence of financial crisis.Under such a large price fluctuation, Import and export trade enterprises of China are under unprecedented pressure. Therefore, in order to use them of avoiding risk and hedge related enterprises in China need urgently to understand and grasp the freight risk management tools,.This paper is researched under such a background.The forward freight agreement is the most active ocean freight risk management tool at present.As the spot market and forward market linkages,market speculation on the impact of FFA will gradually spread to the spot market.Volatility in the spot freight shipping operators will have to face more challenges and opportunities.The main task of the paper is to study the hedge function of the freight forward agreement market with econometric methods.As C3,C4,C5,C4TC the route s for example,the C3 route is charter flights of iron ore from Brazil to China's Baoshan or Beilun port.C5 route is process iron ore from Western Australia to Beilun or Baoshan port.In this thesis,C3 and C5 will be selected as the main routes of flight,and compared with C4 and the cape average.C4 route is from Richards Bay in South Africa to Rotterdam,C4TC is the average price of the shipping price of four C8,C9,C10,C11of the BCI charter flights.Forward data is used the current month (F0), the first month (F1),the second month (F2) of the forward freight market.Through this study,we found that: 1. The correlation coefficient of between the forward freight rates and the spot price is high;The cointegration relationship exists between the forward freight prices and spot prices.2. The route of C5 is the most suitable for hedging in the three routes and the average of the four groups of rental data,the efficiency of hedge the best,followed by the C3 route, the worst is C4TC.3. F1 is the best hedging on the same model, the same route in terms of in the forward data.The data of F1 has more valuable and more relevant for risk management in the hedging practice for enterprises.4. The optimal hedge ratio has been estimated in several ways,and the hedging strategy based on the OLS model is the optimal followed by the CCC--GARCH model.The value of the two models on the basic effect of preserving is at the same level.The B-VAR model and B-VCEM model has the similar hedging effect.It means that there is no need to pursue advanced and complicated methods in the practice of hedging,which provides a valuable reference for hedging.The research of paper provides a theoretical basis for support and decision-making for China's shipping enterprises to participate in the application of FFA market and important guiding significance on companies of the risk management.