In the highly competitive shipping market, the observed freight fluctuation is the main source of commercial risks faced by shipowners and charterers. For the lessee, if he wants to rent a ship for transportation, the increase of freight will lead to the increase of cost. On the contrary, for the shipowner and his ship's employment, reducing freight involves less chartering income. Freight derivative contracts can be used to hedge this risk of dry bulk cargo and tanker shipping sources. At present, participants in the shipping market have different financial instruments to prevent exchange rate fluctuations from adversely affecting the freight itself. These derivatives are not based on exchanges, such as commodity futures and options, but are traded over the counter, such as freight forwarders; Finally, OTC, but there are settlement mechanisms, such as clearing freight forward and options.

Then it is very important to introduce the various characteristics and markets of these products, and more can be deduced by comparing freight rates! Tradition! Obviously, the risk management strategy in shipping provides them with real shipowners and charterers and increases their income. For example, by using derivative contracts for cargo transportation, compared with time chartering, the shipowner only keeps business and controls the ship in the spot market and benefits from favorable conditions. On the other hand, the risk of the lessee's free operation is now the charter agreement at that time. The simplicity of freight derivative contracts makes it easier to trade and contract physical goods. Without physical delivery, the sale of freight derivative financial instruments, just like cash settlement, ends the contract. In addition, the commission paid to the broker is lower than that agreed in the charter party (see Kavussanos and Visvikis, 2006, 2008 for details).

The first OTC freight derivative in shipping market is Forward Freight Agreement (FFA) from 1992. Free fatty acids between buyers and sellers, in order to solve the main freight rate of one-to-one private agreement, the designated quantity is the type of goods or ships, usually one or a pair of dry bulk or main trade routes combined with the tanker department of shipping industry. Because they can! Tailored! In order to meet the needs of users, they have become market participants, and they very much hope that hedging freight logistics can be popularized.