The modelling of dry bulk and tanker markets: a survey

This paper provides an overview of the development of the quantitative modelling techniques that have been applied to the analysis of dry bulk shipping markets. Of necessity it will be dated by the time it is published. The principal points that emerge from the survey are fourfold: first:-reduced form rather than structural modelling, has become the standard approach in the past 15 years. Second, there is a greater focus on modelling rate variability rather than rate levels, using models that estimate the behaviour of both the conditional mean freight rate and its conditional variance. Third, the introduction of models of financial derivatives and their application to shipping markets has been very marked, as finance models of risk management have been adapted to shipping markets. Fourth, the use of segmented models of different ship types, and higher frequency data is now standard. It is argued that the relative neglect of structural models means that estimating fully specified structural econometric models may be a fruitful research agenda for the future.