Freight rate co-movement and risk spillovers in the product tanker shipping market: A copula analysis

摘要

Tanker shipping is a crucial sector carrying energy products across regions worldwide. This paper examines freight rate return dependencies across six major clean product tanker shipping routes by the copula-GARCH model. Using information from marginal and copula models, extreme risk spillover effects between different routes are further examined by the conditional Value-at-Risk (CoVaR) measure. Results reveal that the product tanker shipping market is regionalized and segmented by geographical locations. The dependency is high for different size ships operating in the same trade routes, while freight rates of ships having same sizes operating in adjacent regions have higher dependencies than operating in distant areas. Extreme co-movements exist in most return pairs with significant tail dependence. We further document significant extreme risk spillovers especially between adjacent or same trading routes and such spillover effects are found to be asymmetric in bearish and bullish markets. Our findings provide implications for shipping risk management.