A Study Of The Linkage Correlation And Spillover Effect Of The Spot And Forward Freight Rates Of Dry Bulk Shipping

With the rapid accelerating steps from social construction, china has been raisingthe imported amount of the ironstone and other dry bulk products year after year.Companying with this trend, the risks that are faced to all the shipping process aregradually expanding. The problem that ship and cargo owners should be solved, ishow to implement the risk aversion by using the characterful of the financialderivatives. Especially, in terms of the dry bulk commodities, we should deeply study.This is the reason why the Forward Freight Agreement came out. Shipowners andshippers can conduct the current market operations and do a reverse hedgingtransactions in FFA at the same time, thus,they can avoid the risks from fluctuationsof freight rates.According to the future and yield data from C3and C5routes, usingvector auto-regression model and asymmetric BEKK model as well, this paper studiedthe information transmission efficiency and price forecasts of FFA. C3and C5routesbelong to the Baltic Cape-size from BCI, C3route transports from the Tubar o port toQingdao port, capacity is160,000metric tons, C5route crosses from WesternAustralia to Bei Lun or Bao Shan, capacity is150,000metric tons,the products whichtransported by two major routes are the ironstone and, quotes form is U.S. dollars/ton.This paper mainly discusses the following two aspects:Through the study ofdaily market data of spot and forward FFA of C3route and C5route,the paperanalyzes market volatility and the relationship of current market and forward marketwith impulse response analysis and variance decomposition based on the VectorAuto-regression Model. The result of impulse response analysis shows that volatilityof the forward market is affected by changes of current market, whereas the reverse isless affected, and that fluctuations of C5route can pass to C3route quickly,but thereverse is less strong. From the analysis of variance decomposition,50%of forecastvolatility in current market relies on the responding forward market, but the forecastvolatility of forward market mainly relies on the market itself.Furthermore, the paper analyzes spillover effects with ARCH test and Wald testbased on the Asymmetric BEKK Model under the financial crisis. The result ofARCH test analysis displays that effects from the ARCH truly exists in the C3route andC5route; The result from BEKK estimation illustrates that the volatility spillovereffects derived from C3, C5route indeed be affected by changing economicenvironment. Under the preliminary financial crisis, C3routes spot market rate wassignificantly weaker than the rest of the flow of information of other markets,volatility spillover effects in C5route are more obvious than any other routes; Underinterim financial crisis, The dissemination of information mutual-crossing effects didnot be affected by the financial crisis due to the enough information in C5route;Under the post-financial crisis, the lagged effects from routes self had been replacedgradually by cross effects between different routes, the information between tworoutes enhanced the velocity. The result from Wald test describes that: in thepre-financial crisis,there were no volatility spillover effects between C3and C5forward and spot market, in the interim period, there were no volatility spillovereffects between the C3forward and spot market, similarly,there were also novolatility spillover effects between C3and C5forward market.Overall, when we investigate the rate of information transferring in FFA, weshould consider the history information about the route self firstly and then analysisthe economics period; when we research to forecast the future price of FFA, weshould collect all the similar route data.