The management of risks can make the difference between success or failure when contending with the adverse price movements of the market, and the intense competition which exists in the global shipping industry. Freight rates and their fluctuation constitute the most significant source of business risk. Its increasing recognition has brought with it a significant amount of derivative products, which have begun to offer more effective, flexible and cheaper ways to manage risk. This has become particularly pertinent following the global financial crisis.
This white paper, as extracted from Theory and Practice of Shipping Freight Derivatives (edited by Prof. Manolis G. Kavussanos and Dr. Ilias D. Visvikis) provides an introduction to these issues.