| dc.description.abstract | The thesis investigates the value of a switching option for an LR2 product tanker, which can
switch between dirty and clean freight markets, using a real option valuation model based on
a stochastic freight rate differential between the two markets along with the optimal
switching policy. The parameters have been estimated based on empirical methods of the
freight rates from two resembling routes in the time interval of January 1997 to November
2015. The authors find that the flexibility may add value to owners engaging in switching
strategies, especially at the end of the time series, when the freight rate differential is in favor
of the dirty market.
However, the value of the option and the optimal switching policy is highly dependent on the
parameters. This is indicated in the sensitivity analysis and rolling window estimation. The
sensitivity analysis shows how some of the parameters affect the value and optimal switching
policy. Meanwhile, the rolling window estimation indicates that the model’s assumptions
regarding constant parameters seem to be unrealistic over time, thus the model may not be
suitable to use when valuating the option and finding the optimal switching strategy.
Furthermore it indicates that the sample used to estimate parameters has a large impact on the
value of the option.
Finally, the general limitations of the model are discussed and how these may lead an
unrealistic valuation. | nb_NO |
