GlossaryEN1 min readUpdated: Jun 23, 2026
Derivative Contracts Freight Risk Management
Unlike physical freight procurement, derivative contracts in freight risk management transfer price exposure between parties without any cargo changing hands.
Quick Answer
Last updated: Published:
Source: https://www.balticexchange.com/en/data/derivatives.html
Category
Incoterms 2020 Simulator: Who bears costs & risk?
Reading time
1 min
Words
120
Mentioned in
–
Definition & Explanation
Unlike physical freight procurement, derivative contracts in freight risk management transfer price exposure between parties without any cargo changing hands. The most common instruments are Forward Freight Agreements (FFAs) and freight futures, settled against Baltic Exchange indices and cleared through central counterparties. A shipper with large planned volumes can buy FFAs to cap the rates it pays; a shipowner can use swaps to transfer earnings volatility to capital-market investors. Both sides gain budget certainty, but doing so requires banking relationships, active margin management, and a sound grasp of counterparty credit risk. Freight derivatives have long been standard in dry bulk and tanker markets; the container FFA market has grown in depth but remains less liquid than those more established segments.
Next steps
Matching tools and partners
Related Terms
You might also be interested in these terms
⚖️ ICC Incoterms 2020
Incoterms 2020 Simulator: Who bears costs & risk?
Analyze all 11 Incoterms 2020: cost matrix, risk timeline, insurance gap detector and customs responsibility – free, no login required.
Logistics knowledge straight to your inbox
Free · No password · Never a paywall. Weekly top news and facts from logistics.
Community Questions & Answers
Share your knowledge, ask follow-up questions, or add practical insights to this page. Every contribution is moderated before publication.
No community answers yet. Be the first.