ABSTRACT
This chapter presents the main types, measures and sources of credit risk in the sector. It provides a comprehensive discussion of the tools available to manage it effectively. The chapter presents the potential sources of credit risk in the industry. It focuses on structural models of credit risk. The chapter focuses on credit risk entailed in derivative transactions and bunker fuel oil transactions, respectively. It discusses the critical issue of credit risk management and the tools available to achieve this. Shipping business agreements comprise primarily bilateral private transactions which entail significant levels of credit risk. The shipping market participants who are involved in all the aforementioned bilateral agreements face the risk of an economic loss in case the other party does not fulfill the contractual obligations. Credit Rating Agencies (CRAs) produce credit ratings in order to assess the creditworthiness of a debt issue (bond) and its issuer in a simple and intuitive way.
