Abstract: From the financial point of view, this paper investigates volatility spillovers between forward freight agreement (FFA) and grain futures market. As one of the three major dry bulk cargoes in the world, grain has a mature futures market. FFA and main grain futures transported by Panamax are studied. First, statistical characteristics and co-integration relation of daily return series are analyzed and inspected. A generalized autoregressive conditional heteroskedasticity (GARCH) model is then constructed to analyze correlation and volatility spillover. The results indicate that the grain futures market leads to the changes of FFA market with respect to return and volatility. Thus, this paper demonstrates effectiveness of GARCH-class model to test volatility spillover, providing a theoretical basis for shipping operators.

Key words: forward freight agreement (FFA), generalized autoregressive conditional heteroskedasticity (GARCH) model, grain futures, volatility spillover