The convenience benefits of the shipping market: Evidence from C3 and C5 FFAs

IF 4.1 2区工程技术 Q2 BUSINESS Research in Transportation Business and Management Pub Date : 2024-08-24 DOI:10.1016/j.rtbm.2024.101182

Wenyang Wang , Zihao Wang , Fangyi Zhou , Jinghan Wang , Jinglin Wang , Cong Sui

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Abstract

Forward Freight Agreements (FFAs) are consequential derivatives for risk hedging in the shipping market. This paper presents the first empirical study of convenience yield in the shipping market with a sample of C3 (Tubarao to Qingdao) and C5 (Western Australia to Qingdao) FFAs from 2013 to 2023. First, single-factor and two-factor models are constructed to analyze the random behavior of freight rates in the shipping market, and the existence of convenience yield is empirically tested. The results provide evidence of the existence of convenience yield in the shipping market, with its stochastic variation being a critical factor in shaping the term structure characteristics of FFAs. Second, an ARMAX model is developed for the freight rate index, and the predictive role of the estimated convenience yield and its difference in spot freight rates is analyzed by operating the two-factor model. The findings reveal a significant predictive effect of convenience yield and its difference on spot freight rates. Last but not least, this study emphasizes the importance of convenience yield as a crucial parameter in the shipping market, particularly regarding the transportation of bulk commodities. Changes in the supply and demand of bulk commodities directly impact the fluctuations in shipping market capacity and convenience yield. This study delivers a new explanatory perspective for price formation in the shipping market and is highly valuable for risk management in this sector.

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航运市场的便利效益：来自 C3 和 C5 食品添加剂的证据

远期运费协议（FFA）是航运市场风险对冲的重要衍生工具。本文首次以 2013 年至 2023 年 C3（图巴劳至青岛）和 C5（西澳大利亚至青岛）远期运费协议为样本，对航运市场的便利收益率进行了实证研究。首先，构建了单因素模型和双因素模型来分析航运市场运价的随机行为，并对便利收益率的存在进行了实证检验。结果证明航运市场中存在便利收益率，其随机变化是形成 FFAs 期限结构特征的关键因素。其次，为运费指数建立了 ARMAX 模型，并通过运行双因素模型分析了估算的便利收益率及其差额对即期运费的预测作用。研究结果表明，便利收益率及其差值对即期运费率有明显的预测作用。最后但并非最不重要的一点是，本研究强调了便利收益率作为航运市场关键参数的重要性，尤其是在大宗商品运输方面。大宗商品的供需变化直接影响着航运市场运力和便利收益率的波动。这项研究为航运市场的价格形成提供了一个新的解释视角，对该行业的风险管理极具价值。

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来源期刊

Research in Transportation Business and Management Multiple-

CiteScore

7.10

自引率

8.30%

发文量

175

期刊介绍： Research in Transportation Business & Management (RTBM) will publish research on international aspects of transport management such as business strategy, communication, sustainability, finance, human resource management, law, logistics, marketing, franchising, privatisation and commercialisation. Research in Transportation Business & Management welcomes proposals for themed volumes from scholars in management, in relation to all modes of transport. Issues should be cross-disciplinary for one mode or single-disciplinary for all modes. We are keen to receive proposals that combine and integrate theories and concepts that are taken from or can be traced to origins in different disciplines or lessons learned from different modes and approaches to the topic. By facilitating the development of interdisciplinary or intermodal concepts, theories and ideas, and by synthesizing these for the journal''s audience, we seek to contribute to both scholarly advancement of knowledge and the state of managerial practice. Potential volume themes include: -Sustainability and Transportation Management- Transport Management and the Reduction of Transport''s Carbon Footprint- Marketing Transport/Branding Transportation- Benchmarking, Performance Measurement and Best Practices in Transport Operations- Franchising, Concessions and Alternate Governance Mechanisms for Transport Organisations- Logistics and the Integration of Transportation into Freight Supply Chains- Risk Management (or Asset Management or Transportation Finance or ...): Lessons from Multiple Modes- Engaging the Stakeholder in Transportation Governance- Reliability in the Freight Sector