ABSTRACT
This chapter discusses in-depth the available freight rate derivatives and introduce their trading characteristics. It provides a comprehensive discussion of the past and present use and the development of freight derivatives. The chapter presents early efforts of trading shipping freight derivatives. It introduces the first ever freight futures contract, the Baltic International Freight Futures Exchange (BIFFEX) contract and the first freight option contracts traded. The chapter provides an overview of the history of BIFFEX, from its creation back in May 1985, until its termination in April 2002. It discusses the creation of a derivatives market to serve the needs of the maritime industry; namely, the International Maritime Exchange (IMAREX) from its creation in 2001 until its termination in 2013. The chapter focuses on the current state of the market for freight derivatives. It discusses Over-The-Counter (OTC) Forward Freight Agreements (FFAs) and presents their characteristics and specifications.
