Baltic Dry Freight Index Risk Measure

International dry bulk freight market is full of various risks and freight risk is one of them which have great impact on the maritime companies. The accurate measurement of freight risk is vital to the effective risk management of maritime companies. BDI is an important tool to reflect the price level of the dry bulk freight market and can be used to measure the overall freight risk. The thesis mainly studies how to improve and develop the methods of risk measurement of BDI and includes four sections.Section One introduces the characteristics of international dry bulk freight market and classifies the risks faced by maritime companies. It also reviews the history of BDI and tries to demonstrate the practical background of the thesis.Section Two overviews the methods of risk measurement and focus on VaR and CVaR method, especially on the how CVaR develops VaR, to show why both of the methods are used in this thesis.Section Three is the highlight of the thesis. It introduces the POT methods and uses the method to study the tails behavior of the distribution of returns separately. The distribution of tails is fitted by GPD, then VaR and CVaR are calculated on the basis of the fitted distribution. Also with the empirical values as standards we compare the performance of POT and the traditional method and find that when the heavy tails exist POT exceed the traditional method that it avoids the underestimate of the risk level.Section Four is also the highlight. Based on the statistical modeling of marginal distributions of returns in Section Three it links them with Copula function to achieve the modeling of the joint distribution. With the help of the simulation techniques we also compare the performance of different Copula functions and find that BB1 type is the best one in this case. Also we measure the dependence of the returns of BPI and BCI with Kendall's tau and Spearman's rho...