Measuring level of risk exposure in tanker Shipping freight markets

WESSAM M. T. ABOUARGHOUB, IRIS BIEFANG-FRISANCHO MARISCAL

Abstract


This is an attempt to study the volatility structure of the tanker freight market and its exposure to market shocks. Therefore, we introduce a two state regime to investigate the possibility of two different volatility structures in shipping tanker freight markets. Empirical evidence is found that in general terms, shipping tanker freight returns, shift between two regimes, a high volatility regime and a low volatility regime and that market shocks in general increase the volatility of freight returns and has a lasting effect. In regards to measuring freight risk, it seams that semi-parametric approaches are appropriate methods for measuring level of risk exposure for shipping freight markets.

Keywords


Value at Risk; GARCH; semi-parametric; Markov switching and freight volatility.

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DOI: http://dx.doi.org/10.18533/ijbsr.v1i1.211

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International journal of business and social research (Print)
ISSN 2164-2540

International journal of business and social research (Online)
ISSN 2164-2559

[International Journal of Business and Social Research (IJBSR) previously published by MIR Center for Socio-Economic Research, MD, USA. From February 2018 this journal is published by the LAR Center Press, OR, USA]