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A forward freight agreement (FFA) is a financial forward contract that allows ship owners, charterers and speculators to hedge against the volatility of freight rates. It gives the contract owner the right to buy and sell the price of freight for future dates.
Freight derivatives, which includes forward freight agreements (FFA), container freight swap agreements, container freight derivatives, physical-deliverable freight derivatives, and options based on these, are financial instruments for trading in future levels of freight rates, for dry bulk carriers, tankers and containerships.
The exchange provides daily freight market prices and maritime shipping cost indices which are used to guide freight traders as to the current level of various global shipping markets, as well as being used to set freight contract rates and settle freight futures (known as Forward Freight Agreements or FFAs).
Freight rates and shipping charter rates are on the upswing in certain segments of the ocean transport market. For ship owners who have suffered through years at break-even or below, it's a ...
A freight forwarder or forwarding agent is a person or a company who co-ordinates and organizes the movement of shipments on behalf of a shipper (party that arranges an item for shipment) by liaising with carriers (party that transports goods).
Compared to their futures counterparts, forwards (especially Forward Rate Agreements) need convexity adjustments, that is a drift term that accounts for future rate changes. In futures contracts, this risk remains constant whereas a forward contract's risk changes when rates change.
The International Maritime Exchange or Imarex is an Oslo-based exchange for trading forward freight agreements (FFAs). It started trading tanker freight futures contracts in 2001, followed by dry cargo freight futures contracts in 2002. All futures contracts are cleared by the Norwegian Futures and Options Clearing House (NOS).
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