Study On Volatility Of International Dry Bulk Freight Index Based On Garch Model

The yield and volatility of bulker freight rates have always attracted the attention of bulker operators.Volatility of freight rates is an important factor in formation of transportation policy and it affects the ship owners'cash flow. To understand the rules of volatility is crueial for ship owners and investors to grasp the dynamic of international bulk market.The GARCH model is an important type of time-series model and has already been widely used to model economic and financial time-series data.This thesis applies it in intenational bulk freight market to explore the rules and reason of volatility and makes a concise assessment.This thesis is structured as follows:Firstly, it starts with a brief analysis of the bulk market and then qualitatively investigates the internal causes of volatility from different aspects.The generation, development,composition and computation method of BDI(The Baltic International Bulk Routes) have been discussed.Secondly, it briefly reviews the theoretical basis of ARCH model GARCH model and EGARCH model, comparing the advantages and disadvantages of those three model. It described the application of each model and why those three models were suited to this paper.Thirdly, it collected the data of four kinds of vessels and described the bulk freight rate series in four sub-markets depending on vessel types.the GARCH model is implemented to reveal the persistence and sensitivity of volatility vary across sub-markets.Finally, the general conclusions of the thesis are presented.conelusions and suggestions are made for business practitioners and academic researehers.