Commodity Management Blog

Innovative Ideas and Thought Leadership for Volatile Commodity Marketplace

Theory and Practice of Shipping Freight DerivativesIn January of 2008, Triple Point acquired Softmar, the leading provider of software to manage chartering and vessel operations, including freight risk management. As the freight derivatives market grows in sophistication — so must the range of strategies used. The acquisition enabled Triple Point to immediately provide our customers with solutions to optimize freight management and deepened our solution suite to offer market-based, commodity supply chain management across sourcing, transportation, inventory, operations, and product marketing. In today’s complex and ever-changing commodities markets, the most successful companies are those best prepared to identify risk and model its dynamics, measure and quantify the impact of risk across the enterprise and on financial results, and manage and mitigate risk with an integrated platform that enables better and more proactive decision-making.

Recognized as an industry leader in managing end-to-end shipping operations, we were honored to be invited by Professor Manolis G. Kavussanos and Dr. Ilias D. Visvikis  to participate in a book published by Incisive Media, titled: Theory and Practice of Shipping Freight Derivatives. Our Managing Director of Chartering and Vessel Operations, Michael Lolk Larsen, authored the chapter which examines electronic trading software requirements for the freight derivatives market.

Although roughly 90% of the world’s traded goods by volume are trans­ported by sea, industry surveys show that approximately 80% of companies are still attempting to man­age commercial vessel operations and freight risk through the use of spreadsheets! This creates layers of information that are not transparent to other business units, leading to greater operational risk. Triple Point’s chapter examines how sophisticated software, such as our flagship Chartering and VesselOps™  solution, enables ship owners, charterers, and operators to successfully man­age freight risk holistically by integrating physical and paper markets. It provides an overview of the freight de­rivatives market and examines the interconnected relationship be­tween chartering, vessel operations, and freight risk management. I highly recommend the book as essential reading for all members of the shipping and financial communities. You may purchase the book here.

About the Book

Freight rates and their fluctuation constitutes the most significant source of shipping risk. This increasing recognition has brought with it a significant amount of derivative products, which have begun to offer more effective, flexible and cheaper ways to manage risk. The book provides practical coverage of shipping freight rate derivatives, detailed by leading expert practitioners in the field, and offers best practices from different points of view.  I highly recommend the book as essential reading for all members of the shipping and financial communities. You may purchase the book here.

Other chapters in the book include:

  • The Structure of the Freight Derivatives Markets
  • Credit Risk and the Benefits of Clearing Services
  • The Ship Owner’s and Charterer’s View and Practice of Freight Derivatives
  • The Bankers’ Perspective of Freight Derivatives
  • Accounting and Tax Perspectives
  • Setting up a Freight Rate Risk Management Department