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Evaluation of risk attitude in the shipping freight market under uncertainty

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  • Motokazu Ishizaka
  • Koichiro Tezuka
  • Masahiro Ishii

Abstract

The main purpose of this study is to examine how market participants take risks, in other words, what their risk attitude/preference is, and how their risk attitude could be related to the shipping freight and other markets. To address them, we calibrated the risk attitude of participants in shipping freight markets from 2007 to 2013, and provided an example of the application of risk attitude. For market participants, risk attitude/preference has an important role in understanding shipping freight markets and managing risks under uncertainty. However, risk attitude is not directly observable. To achieve this, we applied a framework that consists of structural model and calibration with market data. We interpreted risk attitude and confirmed that a structural break occurred around 2008 for the calibrated risk attitude parameter. The average risk attitude of market participants tended to be more risk-averse after 2010. We conducted an additional analysis to provide an example of the application of calibrated risk attitude, using structural equation modeling to calculate a latent variable that reflected other commodity markets. We compared the risk attitude parameter and the latent variable, and clarified the relationship between the risk attitude parameter and commodity markets.

Suggested Citation

  • Motokazu Ishizaka & Koichiro Tezuka & Masahiro Ishii, 2018. "Evaluation of risk attitude in the shipping freight market under uncertainty," Maritime Policy & Management, Taylor & Francis Journals, vol. 45(8), pages 1042-1056, November.
    • Handle: RePEc:taf:marpmg:v:45:y:2018:i:8:p:1042-1056
    DOI: 10.1080/03088839.2018.1463107
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    Cited by:

    1. Lai, Xiaofan & Tao, Yi & Wang, Fan & Zou, Zongbao, 2019. "Sustainability investment in maritime supply chain with risk behavior and information sharing," International Journal of Production Economics, Elsevier, vol. 218(C), pages 16-29.
    2. Choi, Tsan-Ming & Chung, Sai-Ho & Zhuo, Xiaopo, 2020. "Pricing with risk sensitive competing container shipping lines: Will risk seeking do more good than harm?," Transportation Research Part B: Methodological, Elsevier, vol. 133(C), pages 210-229.
    3. Jin, Jie & He, Junliang & Wang, Xudong & Han, Chuanfeng & Meng, Lingpeng, 2024. "Contract design in ocean shipping market: A performance credit leveraged mechanism," International Journal of Production Economics, Elsevier, vol. 272(C).
    4. Andreas A. Kouspos & Photis M. Panayides & Dimitris A. Tsouknidis, 2023. "The relationship between technical innovation and financial performance in shipping firms," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 25(4), pages 698-727, December.
    5. Georgios I. Papayiannis, 2022. "Static Hedging of Freight Risk under Model Uncertainty," Papers 2207.00862, arXiv.org.

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