Portfolio optimization of chartering contracts : An empirical study of the chartering policies for Western Bulk Chartering ASA in the period from 2016 to 2022

Abstract

This thesis looks at how the shipping operator Western Bulk can structure their chartering decisions through a portfolio approach. This entails looking at chartering contracts as single investments, which are part of a universal investment set. Looking at the period 2016-2022 we seek to discover how an optimal portfolio can be constructed and how it compares with the actual operations of Western Bulk. Traditionally portfolio optimization has been common within securities and corporate finance. However, its applications have been extended to a wide array of industries. Our paper builds on this and implements this approach into bulk shipping. Through the Markowitz model we investigate what constitutes an optimal portfolio in terms of contractand geographical distribution. The optimal solution finds evidence for deviations to the historic operational data of Western Bulk. These results and preceding calculations have not been subjected to a full set of possible constraints. Thus, our findings do not provide a complete realistic application to Western Bulk’s operations.