Research On The Risk Measurement Of International Dry Bulk Market Based On VaR-GARCH Model

The international dry bulk transportation market is widely known as a highly specialized, capital-intensive as well as high risk market. Under the influence of the situation of international trade, politics and military actions, the volatility of shipping market is remarkable. Before the2008world economy crisis, market pro-cyclical caused by the positive sentiment and high freight rate made owners ordered a large number of vessels, which deteriorated the market condition and the serious excess supply kept the market low. Therefore, the issue of measuring the market risk in a quantitative way attached a great attention among administrators, shipping traders and operators.Panamax vessel is one essential type of ship over60,000dwt and under80,000dwt. The panamax shipping market risk is set as the main research subject, and the VaR-GARCH model is built up which measures the risk of shipping market, after both qualitative analysis and quantitative analysis.First, the paper explained some basic facts and characters of panama bulk transportation market by introducing three aspects which contains international transportation market, the supply and demand status in panama bulk market, and the analysis of transportation freight in panamax market. Second, based on the knowledge above, the VaR and VaR-GARCH model was introduced, which was the mathematic method of this paper. At last, empirical analysis on the VaR of panamax market was made and then we came up with some advices based on the empirical analysis.