PRICE RISK MODELLING OF DIFFERENT SIZE VESSELS IN THE TANKER INDUSTRY USING AUTOREGRESSIVE CONDITIONAL HETERSKEDASTIC (ARCH) MODELS

This paper examines volatility as a measure of risk in the world tanker market for second hand ships. In particular, it models and compares the dynamics of time varying risks between different size vessels. The recently developed class of Autoregressive Conditional Heteroskedasticity (ARCH) models are utilized for this purpose. It is found that oil prices are negatively related to rates of change in tanker prices and positively related to their volatilities. In addition, monthly prices of small vessels are broadly less volatile than larger ones, and the nature of these volatilities vary across sizes. A downward trend in risks is observed in the VLCC and Suezmax carriers, suggesting that risks in the tanker industry have decreased since the first part of the 1980s.

  • Corporate Authors:

    University of British Columbia, Vancouver

    Faculty of Commerce and Business Administration
    Vancouver, British Columbia  Canada  V6T 1Z2
  • Authors:
    • Kavussanos, M G
  • Publication Date: 1996-6

Language

  • English

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 00724685
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Aug 30 1996 12:00AM