Hedging Oil Prices : a case study on Gotlandsbolaget

University essay from Högskolan på Gotland/Institutionen för humaniora och samhällsvetenskap; Högskolan på Gotland/Institutionen för humaniora och samhällsvetenskap

Author: Sajid Ali; Merijon Zhugri; [2011]

Keywords: Gotland;

Abstract:

With the increase of volatility in financial markets and leading to financial risk and corporate failures, organizations are showing keen interest in managing financial risk, one of the most commonly used technique to minimize financial risk is hedging. Hedging of oil prices has also become a common practice especially in shipping. Financial risk managers are busy in saving the industries from expected risk and volatility in oil prices through hedging. Therefore we have decided to look into shipping industry and specifically to study the hedging oil prices with respect to a case study on Gotlandsbolaget.Our case study will also focus on the relationship between oil and ticket price ratios in Gotlandsbolaget, TT Line and Adria Ferries Ltd. In order to collect empirical data we have done interviews with the companies and worked closely with Destination Gotland and Nordea bank.The results of the study show that Gotlandsbolaget hedge oil prices to protect themselves from volatility of oil prices. Regression analysis showed that there is a positive relationship between ticket prices and oil prices in the companies operating in Sweden while a relatively weaker relationship exists for the Adria Ferries Ltd. This study will help the shipping companies, who are either new in hedging or want to minimize and avert the risk and volatility in oil prices through hedging.

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