Concerning financial risk management, the first two essays study the cross-hedging of dry bulk Capesize ship price risks using freight derivatives. The first essay focuses on Forward Freight Agreements FFAs as hedge instruments and empirically compares the hedge effectiveness of a structural pricing model SPM -based hedging approach and a classical minimum-variance cross-hedging approach to derive the desired hedge exposure. The results show that the SPM-based hedging approach consistently outperforms the classical minimum-variance cross-hedging approach in terms of variance reduction. The second essay focuses on freight options as hedge instruments and empirically assesses the hedge effectiveness of different freight option-based cross-hedging strategies using several risk-, downside-risk-, as well as return-based measures. The results suggest that freight options generally qualify quite well as cross-hedge instrument for dry bulk Capesize ship price risks and that one-sided, option-based hedging strategies prove to be beneficial compared to the classical two-sided hedging strategies in case the market development does not require any downside-risk protection. Concerning derivative pricing, the third essay focuses on pricing of Asian options for affine Gaussian diffusions.
Use of Derivatives in Risk Management
The Types Of Derivatives Finance Essay
Do a more advanced search ». Author: Rikard Green ; Lunds Universitet. Abstract: Contracts traded on international financial and commodity markets are associated with complex risk structures. In this dissertation we are concerned with two specific types of risks; market risks and credit risks. The first chapter investigates market risks in the context of the Nordic electricity market. Results also show that the Cornish-Fisher approximation gives reasonable outcomes for the less extreme quantiles, especially when the return distribution is close to normality.
Derivatives and Risk Management
Sahoo, S. PhD thesis, University of Reading. It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. This thesis investigates three unexplored areas in maritime freight and commodity markets; 1 the relationship between commodity and freight markets; 2 the interaction of freight options market with the freight futures and underlying freight rate markets; 3 improving the hedging performance of freight futures contracts by cross hedge technique.
Financial derivatives are often an efficient policy of the risk management as they are been used in modern economy worldwide. Financial derivatives grow on huge scale and very significant into well accepted definitions, measurement and the revelation of the conventional financial accounting essentials. Financial derivatives have many advantages and they have been used worldwide. Though, some risks occur in the use of financial derivatives, the management of the financial derivatives become more essential in the modern economy. With the rapid growth of the modern economy, more financial risks exists during the development process which involves the frequent use of financial derivatives, the use of the derivatives assist against potential risks and use of financial derivatives also reveals to the user a huge risk.