ABSTRACT
This chapter analyses the main sources of business risks that exist in the shipping industry. It outlines the traditional risk management strategies, which emanate from empirical observations and which shipowners and charterers alike have been using historically in order to manage risks within the shipping business. The chapter identifies the sources of risk in the shipping industry. The chapter refers to the transmission of economic information across shipping segments captured by volatility spillovers. It focuses on the correlations among shipping sub-sectors and the diversification benefits arising by managing a diversified fleet of vessels. The chapter discusses the traditional risk management techniques employed in the shipping business. It describes the use of derivatives as tools to manage risk within the shipping markets in an effective manner. Risk management is extremely important in an industry which is riddled with cyclicalities in its rates and prices and which has made and destroyed millionaires over the years.
