The main purpose of this study is to examine how market participants take risks, in other words, what their risk attitude/preference is, and how their risk attitude could be related to the shipping freight and other markets. To address them, we calibrated the risk attitude of participants
in shipping freight markets from 2007 to 2013, and provided an example of the application of risk attitude. For market participants, risk attitude/preference has an important role in understanding shipping freight markets and managing risks under uncertainty. However, risk attitude is not
directly observable. To achieve this, we applied a framework that consists of structural model and calibration with market data. We interpreted risk attitude and confirmed that a structural break occurred around 2008 for the calibrated risk attitude parameter. The average risk attitude of
market participants tended to be more risk-averse after 2010. We conducted an additional analysis to provide an example of the application of calibrated risk attitude, using structural equation modeling to calculate a latent variable that reflected other commodity markets. We compared the
risk attitude parameter and the latent variable, and clarified the relationship between the risk attitude parameter and commodity markets.
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Calibration of risk attitude;
forward freight agreement (FFA);
structural equation modeling (SEM);
Document Type: Research Article
Faculty of Commerce, Fukuoka University, Fukuoka, Japan
College of Economics, Nihon University, Tokyo, Japan
Faculty of Economics, Sophia University, Tokyo, Japan
Publication date: November 17, 2018
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