Details
| Original language | English |
|---|---|
| Pages (from-to) | 440-464 |
| Number of pages | 25 |
| Journal | Journal of Futures Markets |
| Volume | 31 |
| Issue number | 5 |
| Publication status | Published - 1 May 2011 |
| Externally published | Yes |
Abstract
In this article, we consider the pricing and hedging of single-route dry bulk freight futures contracts traded on the International Maritime Exchange. Thus far, this relatively young market has received almost no academic attention. In contrast to many other commodity markets, freight services are non-storable, making a simple cost-of-carry valuation impossible. We empirically compare the pricing and hedging accuracy of a variety of continuous-time futures pricing models. Our results show that the inclusion of a second stochastic factor significantly improves the pricing and hedging accuracy. Overall, the results indicate that the Schwartz and Smith (2000) two-factor model provides the best performance.
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
- Business, Management and Accounting(all)
- General Business,Management and Accounting
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Journal of Futures Markets, Vol. 31, No. 5, 01.05.2011, p. 440-464.
Research output: Contribution to journal › Article › Research › peer review
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TY - JOUR
T1 - Pricing and hedging in the freight futures market
AU - Prokopczuk, Marcel
PY - 2011/5/1
Y1 - 2011/5/1
N2 - In this article, we consider the pricing and hedging of single-route dry bulk freight futures contracts traded on the International Maritime Exchange. Thus far, this relatively young market has received almost no academic attention. In contrast to many other commodity markets, freight services are non-storable, making a simple cost-of-carry valuation impossible. We empirically compare the pricing and hedging accuracy of a variety of continuous-time futures pricing models. Our results show that the inclusion of a second stochastic factor significantly improves the pricing and hedging accuracy. Overall, the results indicate that the Schwartz and Smith (2000) two-factor model provides the best performance.
AB - In this article, we consider the pricing and hedging of single-route dry bulk freight futures contracts traded on the International Maritime Exchange. Thus far, this relatively young market has received almost no academic attention. In contrast to many other commodity markets, freight services are non-storable, making a simple cost-of-carry valuation impossible. We empirically compare the pricing and hedging accuracy of a variety of continuous-time futures pricing models. Our results show that the inclusion of a second stochastic factor significantly improves the pricing and hedging accuracy. Overall, the results indicate that the Schwartz and Smith (2000) two-factor model provides the best performance.
UR - http://www.scopus.com/inward/record.url?scp=79952044691&partnerID=8YFLogxK
U2 - 10.1002/fut.20480
DO - 10.1002/fut.20480
M3 - Article
AN - SCOPUS:79952044691
VL - 31
SP - 440
EP - 464
JO - Journal of Futures Markets
JF - Journal of Futures Markets
SN - 0270-7314
IS - 5
ER -