Practical Freight Derivatives

A course held in association with the Baltic Exchange

The programme outlined below was held in conjunction with The Baltic Exchange in April 2007 and will form the basis for the course when it is next offered in December. Further details will be available shortly.

Session Themes:-

Introduction

pre-1985 shipping: An “information dark age”

brief survey of shipping futures and freight derivatives

how an index differs from a route average

the Manual for Panellists

Baltic Indices: Handy, Supramax, Panamax, Cape and (composite) Dry

Principles of Forward Freight Agreements

nature of the "principal to principal" contract

credit/counter-party risk

key terms of the contract

basis risk explained

correlation of a trade to particular indices

when does money change hands

cash settlement mechanisms

early termination of the contract

residual risk

step-by-step guide to completing an FFA: bids & offers, pricing, settlement periods, counter-party acceptance, and trade confirmation

control of market information: Freight Indices and Futures Committee

integrity of the data

Experience & Perceptions of a User of Dry-Cargo Market FFAs

Choice of routes and correlation issues

examples of trading FFA's in the dry-cargo market

what to buy / what to sell

forward curve implied rates

assessing counter party risk

cleared versus OTC transactions

Tanker Freight Derivatives

characteristics of tanker FFAs

Worldscale basis of the tanker business

trading tanker FFAs

pricing tanker FFAs

Platts vs BITR rates

examples of trades

tanker options

Baltic International Tanker Routes and Baltic Liquified Petroleum Gas Route (LPG1)

Use of London Tanker Brokers’ Panel rate assessments

Experience & Perceptions of a Tanker FFA market user

current market profile

participant profiles

usage of the FFA instrument

hedging

speculation

arbitrage

role of the banks

a forward market view

Clearing Freight Derivatives

the need for multilateral clearing solutions

three guiding criteria: low risk, low cost and efficient use of capital

LCH Clearnet

direct membership and the end-user clearing model

the freight clearing service

margining arrangements to respond to market volatility

Options: The Flexible Trading Tool

what are options

how do options move

how are they priced

uses in the FFA market from the owners' and charterers' perspectives

how options enhance an FFA position

pros and cons of options trading

trading strategies

Portfolio Management of Freight Risk: Practical Applications

traditional versus alternative trading methods

what is “portfolio management”

quantifying freight exposure

spot market and forward curves: implied exposure

specifying the volume of contracts to sell/buy

tactical decisions

amended exposure

devising systems and controls to manage derivative trading

Speakers

The following form the core of the Faculty who have lectured on this course in recent years.

Dr John M Doviak, Director, Cambridge Academy of Transport, Cambridge, UK

Duncan Dunn, Business Development Manager, SSY Futures Ltd, London, UK

Alex Gray, Director, Clarkson Securities Ltd, London, UK
Jim Gretton, Managing Director, Tau Shipping Consultants, Claygate, Surrey, UK
Isabella Kurek-Smith, Customer & Market Management, LCH Clearnet, London, UK
Simon Toyne, Director Tanker FFAs, ICAP Hyde Ltd, London, UK

Course information

2008 dates

Friday 2 May & Friday 28 November

Course fee

The cost of this one-day course is £423 per person, fully inclusive of UK Value Added Tax, tuition, refreshments, and lunch. Accommodation is NOT included but our nominated travel agency company would be pleased to suggest alternatives in London at a range of prices.