Cash flow at risk and risk management in bulk shipping company: Case of capesize bulk carrier

The purpose of this article is to propose an integrated approach for measuring the financial risk in the shipping business. The integrated approach combines the autoregressive conditional heteroskedasticity model, historical data distribution goodness-of-fit test and Monte Carlo simulation. First, a typical forecasting based on the autoregressive conditional heteroskedasticity model is presented to evaluate future cash flows and find that it continues to fall at short periods. Second, the cash flow at-risk measurement by simulation is to understand maximum potential cash flow deficit, and through exposure to develop a risk management strategy that will enable the shipowners or operators to effectively identify, quantify and control most financial risks and exposures.