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A Method of Pricing Freight Options and Its Application

Author: ZhouMingHu
Tutor: PanWeiMin
School: Beijing University of Posts and Telecommunications
Course: Computer Science and Technology
Keywords: Freight options Arithmetic average Asian options Black-Scholes model Risk Management
CLC: F830.9
Type: Master's thesis
Year: 2011
Downloads: 91
Quote: 1
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Abstract


Continuously improve the level of activity of the world's economic activity, financial derivatives market also will be rich and powerful, has become an indispensable part of the world's economies. As a special class of financial derivatives, options are a means of financing, but also an excellent risk management tool, can be used to avoid market risks. This makes it widely used in all walks of life, has become one of the most popular derivatives. Shipping because of its low price, carrying a large quantity of characteristics has become an important part of the global economy. This year along with the deepening of economic globalization, the development of the shipping market was significantly accelerated gradually developed into a highly cosmopolitan, and obvious aggregation of funds industry. Meanwhile, the industry is also due to the operating cycle, the impact of climate change, carrying multiple physical market factors, has always been a high-risk industry, the demand for risk management is very urgent. In this case, for the shipping industry, maritime freight derivatives (hereinafter referred to as freight options) came into being in recent years. Freight derivatives are a new type of options, but just a few years has shown great market potential. High-risk characteristics of the freight market has a dual role: on the one hand, due to strong hedging demand for freight derivatives risk management, on the other hand the potential of high speculative gains also generated a lot of investment demand. In view of the huge potential of the market, their research is very necessary. These studies, the freight option pricing problem is particularly important. Freight options using the calculation method of arithmetic average Asian options. Asian options are path-dependent claims, its pricing is determined by the average price of the underlying asset at the appointed time. This special nature makes it difficult for freight shipping pricing. This article on this issue to explore, and its practical application. Organizational structure of the paper is organized as follows: First introduced in the first chapter briefly Research of shipping options generate the background, the actual significance of option pricing and shipping options. Second chapter summary of the elaboration of the financial derivatives market, the overall situation of the shipping freight market, and made a preliminary analysis of shipping freight transactions from the point of view of financial markets. Subsequently, the third chapter introduces some of the basic assumptions of the option pricing problems, and focus on the Black-Scholes model, several important conclusions, and a brief discussion of the Black-Scholes model is used directly in the arithmetic average Asian option pricing problem mathematical model; at the end of this chapter, the article compares the similarities and differences between stock options and freight options, these are to prepare for the mathematical models of the following shipping options. In the fourth chapter, article freight option pricing model, the spot price and the FFA forward price of shipping options trading involves, and on this basis, given the amount of freight option price formula. Followed by the fifth chapter focuses on a crucial problem in Chapter IV model: volatility calculation and analysis around this problem the possibility of three common methods used in the shipping options. Chapter VI will use the first two chapters of the discussion, the mathematical model and method of calculation of the volatility used in the actual data. Of the full text of the discussion at the end of this article, we summarize the necessary discussion of the advantages and disadvantages of the method of calculation of the text options, and look forward to the possible direction of future freight option pricing problems.

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CLC: > Economic > Fiscal, monetary > Finance, banking > Finance, banking theory > Financial market
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