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A Discrete-Time Stochastic Partial Equilibrium Model of the Spot Freight Market


  • Roar Adland
  • Siri P. Strandenes


This paper presents a stochastic extension of the classical partial equilibrium models of the spot freight market. The supply of sea transport in the model is based on microeconomic analysis of the supply characteristics of a given fleet and orderbook, in this case the VLCC fleet. It also develops a fully stochastic representation of the aggregate scrapping and contracting behaviour in the market. Combined with stochastic demand, the model is used to simulate the probability distribution of future spot freight rates and fleet size conditional on current market conditions. The model can be applied to a wide range of maritime economic problems such as the evaluation of risk for ship loans and freight derivative portfolios. © 2007 LSE and the University of Bath

Suggested Citation

  • Roar Adland & Siri P. Strandenes, 2007. "A Discrete-Time Stochastic Partial Equilibrium Model of the Spot Freight Market," Journal of Transport Economics and Policy, University of Bath, vol. 41(2), pages 189-218, May.
  • Handle: RePEc:tpe:jtecpo:v:41:y:2007:i:2:p:189-218

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    Cited by:

    1. Zheng, Shiyuan & Lan, Xiangang, 2016. "Multifractal analysis of spot rates in tanker markets and their comparisons with crude oil markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 444(C), pages 547-559.
    2. Sun, Xiaolei & Tang, Ling & Yang, Yuying & Wu, Dengsheng & Li, Jianping, 2014. "Identifying the dynamic relationship between tanker freight rates and oil prices: In the perspective of multiscale relevance," Economic Modelling, Elsevier, vol. 42(C), pages 287-295.
    3. Assmann, Lisa & Andersson, Jonas & Eskeland, Gunnar S., 2015. "Missing in Action? Speed optimization and slow steaming in maritime shipping," Discussion Papers 2015/13, Norwegian School of Economics, Department of Business and Management Science.
    4. Engelen, Steve & Norouzzadeh, Payam & Dullaert, Wout & Rahmani, Bahareh, 2011. "Multifractal features of spot rates in the Liquid Petroleum Gas shipping market," Energy Economics, Elsevier, vol. 33(1), pages 88-98, January.
    5. Adland, Roar & Cariou, Pierre & Wolff, Francois-Charles, 2016. "The influence of charterers and owners on bulk shipping freight rates," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 69-82.
    6. Rau, Philipp & Spinler, Stefan, 2017. "Alliance formation in a cooperative container shipping game: Performance of a real options investment approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 101(C), pages 155-175.
    7. Rau, Philipp & Spinler, Stefan, 2016. "Investment into container shipping capacity: A real options approach in oligopolistic competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 93(C), pages 130-147.
    8. repec:eee:transe:v:104:y:2017:i:c:p:36-51 is not listed on IDEAS
    9. Tezuka, Koichiro & Ishii, Masahiro & Ishizaka, Motokazu, 2012. "An equilibrium price model of spot and forward shipping freight markets," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 730-742.

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