Dynamics of the Term Structure and Volatility of Shipping Freight Rates
This paper investigates the relationship between the dynamics of the term structure and time-varying volatility of shipping freight rates. Using a dataset covering the period from January 1992 to September 2007 and augmented EGARCH models, we find support for the argument that the volatility of freight rates is related to the shape of the term structure of the freight market. Furthermore, it is found that this relationship is asymmetric in the sense that when the freight market is in backwardation, volatility is higher compared to periods when the market is in contango. The results have important implications for freight risk analysis and management. © 2011 LSE and the University of Bath
Volume (Year): 45 (2011)
Issue (Month): 1 (January)
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