In this paper two alternative ways of modelling the stochastic nature of the time charter equivalent spot rate in the market for Very Large Crude Carriers (VLCC) are presented. It has been proposed that the freight rate follows an Ornstein-Uhlenbeck process. We follow up this approach of relating uncertainty directly to the rate process itself by suggesting a geometric mean reversion process. Empirical findings are presented. Then we address the question of valuing a VLCC. Due to the presence of uncertainty, flexibility to choose operation policy influences the value. We focus on lay up and scrapping as alternatives to spot operation. The option to lay up is relatively more important for a new vessel than for an old one, whereas the option to scrap becomes relatively more valuable as the vessel gets older.
Valuation of VLCCs under income uncertainty
Maritime Policy & Management ; 24 , 2 ; 159-174
1997-01-01
16 pages
Aufsatz (Zeitschrift)
Elektronische Ressource
Unbekannt
Valuation of VLCCs under income uncertainty
Online Contents | 1997
|British Library Online Contents | 1998
REGULARS - NEWS REVIEW - NYK to manage VLCCs in-house
Online Contents | 1999
Structural performance management of VLCCs - an owner''s approach
Tema Archiv | 1992
|RATES AND BUNKERS - Focus turns to VLCCs as suezmax surges
Online Contents | 2001