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The Pricing of Forward Ship Value Agreements and the Unbiasedness of Implied Forward Prices in the Second-Hand Market for Ships

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  • Roar Ådland

    ([1] Agder University College, School of Management, Kristiansand, Norway [2] Clarksons Research, London, UK)

  • Haiying Jia

    (Cass Business School, City University, London, UK)

  • Steen Koekebakker

    ([1] Agder University College, School of Management, Kristiansand, Norway [2] 4Agder Research, Kristiansand, Norway.)

Abstract

This paper outlines the methodology to price the newly introduced Forward Ship Value Agreements (FOSVAs). FOSVAs are derivatives aimed at managing asset risk in the second-hand markets for bulk vessels and are traded over the counter. We then estimate the implied forward prices from historical data for vessel prices and the term structure of freight rates under the assumption that the cost-of-carry relationship holds and investigate whether the implied forward prices have been unbiased predictors of realised prices. The empirical evidence rejects the unbiasedness hypothesis in all the cases studied and supports the presence of a risk premium. Maritime Economics & Logistics (2004) 6, 109–121. doi:10.1057/palgrave.mel.9100098

Suggested Citation

  • Roar Ådland & Haiying Jia & Steen Koekebakker, 2004. "The Pricing of Forward Ship Value Agreements and the Unbiasedness of Implied Forward Prices in the Second-Hand Market for Ships," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 6(2), pages 109-121, June.
  • Handle: RePEc:pal:marecl:v:6:y:2004:i:2:p:109-121
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    Cited by:

    1. Alexandridis, George & Kavussanos, Manolis G. & Kim, Chi Y. & Tsouknidis, Dimitris A. & Visvikis, Ilias D., 2018. "A survey of shipping finance research: Setting the future research agenda," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 164-212.
    2. Krzysztof Bogusławski & Mateusz Gil & Jan Nasur & Krzysztof Wróbel, 2022. "Implications of autonomous shipping for maritime education and training: the cadet’s perspective," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 24(2), pages 327-343, June.
    3. Roar Adland & Haakon Ameln & Eirik A. Børnes, 2020. "Hedging ship price risk using freight derivatives in the drybulk market," Journal of Shipping and Trade, Springer, vol. 5(1), pages 1-18, December.
    4. Keun-Sik Park & Young-Joon Seo & A-Rom Kim & Min-Ho Ha, 2018. "Ship Acquisition of Shipping Companies by Sale & Purchase Activities for Sustainable Growth: Exploratory Fuzzy-AHP Application," Sustainability, MDPI, vol. 10(6), pages 1-13, May.

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