Valuation of time charter contracts for ships

摘要

This article describes a valuation method for time charter contracts for ships, i.e. leasing contracts for ships with embedded Bermudan options for buying the ship and extending the contract. As there often are embedded foreign exchange options in the buy options on the ship, a two factor stochastic model is developed and it is shown how the price can be determined applying techniques from contingent claim analysis such as dynamic programming.