ABSTRACT
Over the last decade, the tramp shipping markets have undergone a fundamental transformation. This period is characterised by very high volatility in the level of freight rates as well as the emergence, and corresponding growth in the derivatives market for freight. Traditionally, this was a market that was used by players in the physical freight market, such as shipowners, operators and trading houses, to hedge their risks although this is now changing rapidly with the increasing participation of investment banks, hedge funds and other traders that may not be involved in the underlying physical market. This has resulted in the commoditisation of the freight market. Nowadays, freight rates can be bought and sold like any other commodity, despite the fact that freight rates essentially represent the cost of providing the service of seaborne transportation and, hence, are not classifi ed as a tangible commodity.
