This course is designed to be taken after Freight Derivatives & Shipping Risk Management, but is suitable for experienced freight traders.

This advanced two day module focuses on pricing freight options, modelling freight rate dynamics and pricing options on freight. It covers constructing forward curves on freight, modelling freight rate volatility as well as hedging and trading strategies using FFA and freight options.

Course Leaders
Prof. Amir Alizadeh   Centre for Shipping, Trade & Finance  Bayes Business School (former Cass Business School)
Prof. Nikos Nomikos Centre for Shipping, Trade & Finance Bayes Business School (former Cass Business School)

The course leaders, Prof. Amir Alizadeh and Prof. Nikos Nomikos of Bayes Business School (former Cass Business School), are both internationally recognised academics in the fields of shipping and commodity finance, and risk management. Their theoretical and applied research work has been published in leading academic and professional journals and they also provide consultancy services to the industry on different aspects of commodity and shipping risk management.


Please click here for our 2024 course brochure.

Course Overview

Module Outlines

Introduction to the Freight Market

 

Freight contracts; characteristics of the freight market; relationship between spot and time-charter freight rates

Introduction to the Freight Market

Shipping market overview

Spot & TC rate formation

Simple volatility estimation

Comparison of volatility & seasonality across different subsectors

Econometric models in shipping

Forward Freight Agreements

 

Practicalities of trading; hedging and trading examples

Freight Forward Agreements

Practicalities of trading

What to consider when hedging

Basis risk and how to manage it

How to calculate hedge ratios

Spot Price Dynamics

 

Mathematical models for freight rates; mean reversion, seasonality and jump diffusion models; estimating and setting up models

 

Part 1: Stochastic Processes for Spot Prices

Stochastic processes and use

Basic stochastic processes including GBM and MR models

Estimation of parameters and building models for simulation analysis

Part 2: Stochastic Processes for Spot Freight Modelling

Jump diffusion models

Mean reversion jump diffusion model

Estimation of parameters & seasonal components

Comparison of models

Bivariate stochastic models & ship valuations

Forward Curves

 

How to construct a forward curve

FFA and Forward Curve Models

 

Baltic Forward Assessments

Forward curves and volatility

Constructing forward curves

Technical Analysis and Freight Trading

 

Chart analysis; technical trading rules; spread trading; implied TC rates

 

Part 1: Practical Analysis and Technical Trading Rules

Chart analysis (trend lines, head and shoulders, triangle patterns, support & resistance)

Technical trading rules

Moving Averages (MA) and Cross Over Trading Rule

Stochastic oscillators

Filter rules

Momentum trading model: Relative Strength Index

Part 2: Technical Analysis & Trading Rules

Tanker spread trading

Dry bulk spread trading

Implied forward rates

Risk Management Using Options

 

Freight options; hedging with options; option trading strategies

 

Part 1: Freight Rate Risk Management Using Options

Types of contract: European vs American

Payoff profiles

Using freight options for hedging

Risk management strategies with options

Part 2: Freight Rate Risk Management Using Options

Directional strategies

Volatility strategies

Trading strategies in action

Modelling Freight Rate Volatility

 

Volatility models (historical, time-varying & implied); estimation and interpretation; forecasting volatility

Modelling Freight Volatility

Historical volatility estimation

Time varying volatility models

Volatility term structure

Implied volatility

Pricing Freight Options

 

Determinants of option prices; pricing Asian options using closed-form models; Monte Carlo Simulation

 

Part 1

Factors affecting option values

Boundary conditions & put call clarity

Options pricing - closed form solutions

Part 2

Closed form solutions

Jump diffusion model

Monte Carlo Simulation

Real Options in Shipping

 

Key option value drivers; different types of real options; option to choose (spot vs timecharter); option to lay-up; real options and ship valuation; real options and extended Net Present Value; identifying and valuing real options in shipping

 

Part 1: Real Options and Optionality in Shipping

Financial options vs real options

NPV and real options

Key option value drivers

Real option valuation using binomial option pricing

Part 2: Real Options and Optionality in Shipping

Options in projects and operations

Option to extend TC contract

Option to scrap and exit

Option on newbuilding contracts

Option to lay up

Option to purchase

Sensitivity analysis

Writing and Risk Management of Option Positions

 

Option price sensitivities (Greeks); dynamic and static Delta hedge; Delta-Gamma hedging; Greeks of Asian options

 

Part 1: The Option "Greeks"

 

How to hedge a short option position

Introducing the Greeks (Delta, Gamma, Theta, Alpha)

Delta hedging

Part 2: The Option "Greeks"

Explaining the remaining "Greeks"

Gamma, Theta, Vega, Alpha (Gamma Rent)

Using the "Greeks"

Delta hedging

Value at Risk of Shipping Freight Rates

 

Estimation & interpretation; VaR methodologies; VaR for nonlinear instruments

 

 

Part 1: VAR Definition and Estimation

What is Value at Risk and why is it important?

Simple VaR calculations using volatilities

VaR of portfolios, two-assets, multi-assets

Part 2: VaR Methodologies

Volatility estimates

Parametric vs nonparametric VaR

Filtered Historical Simulation VaR

Backtesting and stress testing

Part 3: VaR of Non-Linear Instruments (Options)

Mapping and approximation of option VaR

VaR of option portfolios

VaR of options using simulation

Terms and Conditions

The Baltic Exchange must be in receipt of full payment before access to the course is granted.

For the e-learning course, each delegate is provided with 180 days access to the course. If you fail to complete the course in 180 days, then you may extend the course by paying a change fee (£50 + vat per 30 days).

No course material may be copied or reused without the permission of the Baltic Exchange. You must not allow any third party to use your account information and/or computing equipment to access the digital content or course that you have booked.

You may only print off any course materials for your own personal use. You must not provide, offer to sell, license or transfer the course materials (whether in whole or in part in any manner or form or in or on any media) to any other person unless we have agreed to this in writing.

In the event that we are unable to deliver classroom learning due to events beyond our control, delegates will be offered the choice of a discounted online only option, refund, reschedule to a future date, or access to an additional online course.

Further Questions

Please contact: 
Tel:  +44 (0)20 3326 8465

Email:  [email protected]

Previous Attendees

Run since 2005, this course has been attended by a huge range of shipowners, charterers, brokers and financial institutions with an exposure to the bulk shipping markets. These include:

A Bilbrough & Co
Aalborg Portland
ABN Amro Futures
Aegean Baltic Bank
AET Tankers
AgriService
Alfred C Toepfer International
AM Nomikos
Amarante Shipping
Ammagi
Anglo American
Aquila Maritime Management
ArcelorMittal Treasury
Archer Daniels Midland
Arista Shipping
Augustea Shipping Services
AWB Ltd
AWB Singapore
Bank of Ireland
Bank of Nova Scotia
BHP Billiton
BHP Billiton Marketing Asia Pte
Bibby Line
BIMCO
Bloomberg
BNP Paribas
BP
BP Shipping
Brave Maritime
Brunei Gas Carriers
Bulcom
Business Intelligence Group
Calyon Asia Shipfinance
Cape Tankers
Castalia Fund Management (UK)
CBH Group
CC Maritime
Chandris (Hellas)
China Navigation Co
Chinese Maritime Transport
Clarksons
Clipper Bulk
Clipper Group A/S
Coal & Oil Company
Commodities
ConocoPhillips International
Constellation Energy
Conti Reederei
Copenship
Copersucar
CSAV Norasia Liner Services
CSL Asia Shipping
CSL International Inc.
D’Amico Dry
Dae Yang Shipping
Dome Chartering
Drax Power
DVB Bank
Dynacom Tankers
Eastport Maritime
Eastern Bulk Carriers
EDF Trading
Eitzen Bulk
Electric Power Development Co
Emarat Maritime
Emirates Ship Investment Co
Enel Trade
Energy Argus
Equinox Maritime
Excel Maritime Carriers
Fednav
Femis
Financial Conduct Authority
FinnFleet Tankers
Fitch Risk
Fokus Bank
Foresight
Freight Investor Services
GE Transportation Finance
Genshipping
Gestion Maritime
Getax Ocean Trades
GFI-ACM
Glencore
Global Harvest Trading
Glory Ship Management
Golden Ocean Management
Great Eastern Shipping Co
Grindrod
Harmony Shipping
Heidmar
HF Navigator
Hochu Petroleum
Holbud
Holman Fenwick Willan Singapore
Honors Commodity Singapore
HSBC
HSH Nordbank
Hua Dao Shipping (The East)
Iino Shipping
Intermar
Ispat Industries
J. Lauritzen USA
Jerra Global Markets
Jiaotong University
John F Dilon
Klaveness Asia Pte Ltd
Kredittbanken ASA (Osloavd)
Laskaridis Shipping
Leros Management
Litasco
Lykiardopulo
M2M Management
M Maritime
Maersk Tankers
Maritime 24
Maritime and Port Authority of Singapore
Masterbulk
McTaggart Shipping & Management
Mercator Lines (Singapore)
Merrill Lynch Commodities
Midship Marine
Mitsui OSK Bulk Shipping (Europe)
Mitsui & Co
Mitsubishi Corp
Mittal Shipping
Motia Compagnia di Navigazione
MT Maritime Management
MUR Shipping
Murmansk Shipping
National Bank of Fujairah
Navico International
Newlead
Nexus Management
NIBC Bank
Nidera Handelscompagnie
Norden
Nordic Bulk Carriers
North of England P&I Assoc
NorthEdge Risk Services
Nuon
NYK Bulkship (USA)
Ocean Tankers
Oceania Impex
Odin Marine
Olam International
Oldendorff Carriers
OSG Ship Management
OW Bunker
Pacific Basin
Pacific Rim Shipping
Phoenix Bulk Carriers
Poten & Partners Inc
Power International
Prime Marine
PT BCA Tbk
Qawareb Ship Management
Quadra Commodities
RAG Trading
Redpath Sugar
Reuters
Rio Tinto
Rio Tinto Shipping (Asia)
Royal Bank of Scotland
RWE
San Miguel Corporation
Scanmills
Scottish Power
Seasure Shipping
Seatrek Trans
SGX
Shell
Sims Metal Management
Singapore Exchange
Siva Bulk Shipping
SK Corporation
SK Shipping Co. Ltd
Sociedad Naviera Ultragas
SS Freight Solutions
SSY
Standard Chartered Bank
Statoil
Suek
Summit Maritime
Tailwind Shipping
Taipan Shipbrokers
Tai Chong Chiang Steamship
TataNYK
TBS Shipping Services
Teekay
The Lion Group
Thoresen & Co. (Bangkok) Ltd.
Thurlestone Shipping
Torm
Torvald Klaveness
Total Gas & Power
Total Energies Trading
Tradition Financial Services
Trafigura
Transcenden Global
Transglobal Chartering
Triple Point Technology
Triworld
Unipec UK
United Arab Shipping Company
V Bulkers
Veson Nautical Corporation
Viterra
Vitol
Wallem Commercial Services
Waterfront Chartering
West Asia Maritime
Western Bulk
Worldscale
Zim