The Jump Linkage Between International Dry Bulk Forward Freight Markets Based on SVCJ-TVP-VAR Model

Hui ZHANG

The Jump Linkage Between International Dry Bulk Forward Freight Markets Based on SVCJ-TVP-VAR Model

2023

Hui ZHANG

In order to explore the risk linkage between different forward freight markets, this paper used the SVCJ-TVP-VAR model, selected the forward freight agreement (FFA) daily data of three ship types from 2014 to 2020, and analyzed the dynamic relationship between return jump and volatility jump in the international dry bulk FFA market from the static and dynamic perspectives. The results showed that: (1) The jumping phenomenon in the Capesize's FFA market with active trading was the most obvious, and the jumping phenomenon in the Handymax's FFA market was the weakest; (2) The phenomenon of three markets jumping at the same time was weak, and the number of times of two markets jumping at the same time was strong, among which the Capesize and Panamax had the most jumps; (3) There was a time-varying and complex two-way linkage between the forward freight market, and this linkage effect was the strongest in the short term and the weakest in the long term; (4) Whether it was return jump or volatility jump, the three markets had different reaction degrees to jump information. The response of the Cape ship type FFA market to the jump information was the most intense, and the response of other markets to the jump information of the Capesize was the highest; (5) When the extreme events that cause the overall market downturn occured, FFA market often showed a positive jump linkage effect, which had provided a reference for market regulators and participants.

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