Freight Derivative

A Freight derivative is a financial instrument for trading in future levels of freight rates, primarily for dry bulk carriers and tankers. Such instruments include exchange traded futures contracts and options on futures contracts, plus OTC (over-the-counter) freight forward contracts like FFAs (Forward Freight Agreements) swaps and swaptions. Cleared freight futures contracts are traded on the Oslo based exchange Imarex (International Maritime Exchange ASA), and in the past used to be traded on BIFFEX and INTEX. Freight derivatives are primarily used by shipowners and operators, oil companies, trading companies and grain houses as tools for managing freight market risk.

 

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