Perspectives on Spaces for Teaching and Learning

Peer reviewedPublisher PD

Freight Derivatives Pricing for Decoupled Mean-Reverting Diffusion and Jumps

We develop an accurate valuation setup for freight options, featuring an exponential meanreverting model for the freight rate with distinct reversion scales for its jump and diffusion components. We calibrate to Baltic option prices and analyze the freight rate dynamics. More specifically, we observe that jumps dissipate faster than the diffusive deviations about the equilibrium level. We benchmark against practitioners’ model of choice, i.e., the lognormal model and variants, and find that our approach reduces the pricing error while preserving analytical tractability and computational competence. We also find that neglecting fast mean-reverting jumps leads to nontrivial option mispricings

Herd behavior in the drybulk market: An empirical analysis of the decision to invest in new and retire existing fleet capacity

We examine whether investors herd in their decision to order or scrap vessels in the drybulk market. We decompose herding into unintentional and intentional, and test for herd behavior under asymmetric effects with respect to freight market states, cycle phases, risk-return and valuation profiles, and ownership of the vessel. We detect unintentional herd behavior during down freight markets and contractions. Furthermore, we find evidence of spill-over unintentional herding effects from the newbuilding to the scrap market. Finally, asymmetric herd effects are evident between traditional and liberal philosophy towards the ownership of the vessel, and during extreme risk-return and valuation periods

Shipping equity risk behavior and portfolio management

This paper investigates the dynamics of stock price volatility for different vessel-type segments of the U. S, water transportation industry . We measure market exposure by a portfolio of tanker, dry bulk, container, and gas stocks to examine tail behavior and tail risk dependence. The role of mixture distributions in predicting future volatility is studied from both statistical and economic perspectives. We further test for predictability in co-movements in the tails of sectors returns . Findings indicate that large losses are strongly correlated, supporting asymmetric transmission processes for financial contagion. Finally, using a non-parametric approach, we extend the model to the multivariate case and assess the value of volatility and correlation timing in optimal portfolio selection. The results can help to improve the understanding of time-varying volatility, correlation and tail systemic risk of shipping stock markets, and consequently, have implications for risk management and asset allocation practices, as well as regulatory policies

Freight options: Price modelling and empirical analysis

This paper discusses an extension of the traditional lognormal representation for the risk neutral spot freight rate dynamics to a diffusion model overlaid with jumps of random magnitude and arrival. Then, we develop a valuation framework for options on the average spot freight rate, which are commonly traded in the freight derivatives market. By exploiting the computational efficiency of the proposed pricing scheme, we calibrate the jump diffusion model using market quotes of options on the trip-charter route average Baltic Capesize, Panamax and Supramax Indices. We show that the jump-extended setting yields important model improvements over the basic lognormal setting

Affine-Structure Models and the Pricing of Energy Commodity Derivatives

We consider a seasonal mean-reverting model for energy commodity prices with jumps and Heston-type stochastic volatility, and three nested models for comparison. By exploiting the affine form of the log-spot models, we develop a general valuation framework for futures and discrete arithmetic Asian options. We investigate five major petroleum commodities from Europe (Brent crude oil, gasoil) and US (light sweet crude oil, gasoline, heating oil) and analyse the effects of the competing fitted spot models in futures pricing, Asian options pricing and hedging. We find evidence that price jumps and stochastic volatility are important features of the petroleum price dynamics

Shipping Investor Sentiment and International Stock Return Predictability

Stock return predictability by investor sentiment has been subject to constant updating, but reaching a decisive conclusion seems rather challenging as academic research relies heavily on US data. We provide fresh evidence on stock return predictability in an international setting and show that shipping investor sentiment is a common leading indicator for financial markets. We establish out-of-sample predictability and demonstrate that investor sentiment is also economically significant in providing utility gains to a mean-variance investor. Finally, we find evidence that the predictive power of sentiment works best when negative forecasts are also taken into account

Gonadectomy in conditions affecting sex development: a registry-based cohort study

Objectives: To determine trends in clinical practice for individuals with DSD requiring gonadectomy. Design: Retrospective cohort study. Methods: Information regarding age at gonadectomy according to diagnosis; reported sex; time of presentation to specialist centre; and location of centre from cases reported to the International DSD Registry and who were over 16 years old in January 2019. Results: Data regarding gonadectomy were available in 668 (88%) individuals from 44 centres. Of these, 248 (37%) (median age (range) 24 (17, 75) years) were male and 420 (63%) (median age (range) 26 (16, 86) years) were female. Gonadectomy was reported from 36 centres in 351/668 cases (53%). Females were more likely to undergo gonadectomy (n = 311, P < 0.0001). The indication for gonadectomy was reported in 268 (76%). The most common indication was mitigation of tumour risk in 172 (64%). Variations in the practice of gonadectomy were observed; of the 351 cases from 36 centres, 17 (5%) at 9 centres had undergone gonadectomy before their first presentation to the specialist centre. Median age at gonadectomy of cases from high-income countries and low-/middle-income countries (LMIC) was 13.0 years (0.1, 68) years and 16.5 years (1, 28), respectively (P < 0.0001) with the likelihood of long-term retention of gonads being higher in LMIC countries. Conclusions: The likelihood of gonadectomy depends on the underlying diagnosis, sex of rearing and the geographical setting. Clinical benchmarks, which can be studied across all forms of DSD will allow a better understanding of the variation in the practice of gonadectomy