Risk Management and Applications
Containerisation is one of the youngest sectors in the shipping industry. It first emerged in 1955. A decade later, the container fleet stood at r.d. 2.8 m TEU, and it has continued this significant growth. As of May 2012, the total container fleet is recorded at r.d. 15.7 m TEU, an increase of 458 % in 16 years at the rate of 28.6 % per year.
This chapter aims to outline a concept of how new projects—either the acquisition of second-hand tonnage or the placement of new building orders—in the container segment could be structured and considers the limitations of the traditional models used in the container shipping industry.
The concept follows the assumption that ships earn money through the transportation of cargo. The basis of the charter rate for a ship should be connected to the income generated in the freight market. As a benchmark, one of the existing container freight indices will be used. Through the use of derivatives that are settled against the same index, the remaining market risk can be transferred to a third party within the industry, or outside, to a professional risk taker.