Educational freight index sandbox (synthetic proxy)
"Wall Street was shorting shipping futures. The market in freight derivatives (FFAs) now matches the physical market."
- Jeffrey Epstein email, October 2009. U.S. Department of Justice
Learn what they were trading. Forward Freight Agreements (FFAs) are the derivatives market mentioned in the 2009 Epstein email.
Freight-Sim is committed to transparency and education. Our synthetic freight index is designed to help you explore freight market dynamics in a safe sandbox. To deepen your understanding, this page explains key concepts and provides trusted resources for further learning.
The Baltic Exchange is a London-based membership organisation that publishes daily assessments of shipping rates on a variety of routes. These assessments are used to construct indices such as the Baltic Dry Index and serve as benchmarks for settling freight derivatives.
A forward freight agreement is a financial forward contract that allows ship owners, charterers and speculators to hedge against freight rate volatility. FFAs are built on an index composed of one shipping route or a basket of routes and are traded over-the-counter. Rather than taking physical delivery of cargo, the contracts settle in cash against the average spot freight price published by the Baltic Exchange.
Imagine you're a shipper worried that freight costs might rise. You can enter into an agreement today to "lock in" a price for a future month. If the actual freight rate ends up higher, you'll receive a payment to offset your higher shipping cost. If it ends up lower, you'll pay the difference. Either way, the contract protects you from unexpected swings.
Freight futures clear through exchanges much like other futures contracts. Major clearing venues include the European Energy Exchange (EEX) and the Singapore Exchange (SGX). Freight options and swaps offer additional ways to hedge or speculate on freight rate movements.
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