Dynamic spillover effects among derivative markets in tanker shipping

Abstract

This paper examines the dynamic spillover effects among derivative markets in tanker shipping. Results indicate that dynamic cross-market interactions have significant impact on the direction and magnitude of risk exposures. While crude oil futures are the main information transmitter to the other two derivative markets, bunker futures also serve in a buffering role, as simultaneous transmitter and receiver. The response of the dirty and clean tanker forward freight agreements (FFAs) to oil shocks varies according to market conditions. Our results provide market participants with useful early warning signs of sharp market shocks and crises.