An option contract model for leasing containers in the shipping industry
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An option contract model for leasing containers in the shipping industry Alejandra Gómez‑Padilla1 · Rosa G. González‑Ramírez2 · Fernando Alarcón3 · Stefan Voß4 Accepted: 27 August 2020 © The Author(s) 2020
Abstract We propose an option contract model for the leasing of containers. In an option contract, the shipping company commits to order a quantity of containers from the leasing company and has the right to modify its order at a later stage, according to its actual requirement. Under this scheme, the shipping company is allowed to request a smaller or larger number of containers than the agreed initial order. This is done by buying an option premium in advance from the container leasing company. We present numerical results for different scenarios based on information provided by experts in the industry. For the purposes of comparison, a nonoption contract scheme is also evaluated. According to our numerical results, an option contract is better under a scenario where demand is normally distributed with a large stand‑ ard deviation. This scenario is commonly observed in practice due to the dynamism and volatility of the shipping industry. We conclude that, under an option contract scheme, the shipping company has more flexibility to adjust its demand for contain‑ ers and to be requested from the leasing company, and this adjustment is compen‑ sated by an option price determined according to variations in demand. Keywords Container leasing · Option contracts · Cox–Ross–Rubinstein pricing model · Maritime shipping · Shipping line
* Stefan Voß stefan.voss@uni‑hamburg.de 1
Department of Industrial Engineering, Universidad de Guadalajara, Guadalajara, Mexico
2
Faculty of Engineering and Applied Sciences, Universidad de los Andes Chile, Mons. Álvaro del Portillo 12455 Las Condes, Santiago, Chile
3
Hapag Lloyd AG, Santiago, Chile and Hamburg, Germany
4
Institute of Information Systems, University of Hamburg, Hamburg, Germany
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A. Gómez‑Padilla et al.
1 Introduction Intermodal transport, powered by containers, has contributed significantly to the economic development of nations and to the enormous growth of world trade. Transportation of general cargo has undergone important changes due to the intro‑ duction of the container.1 As indicated by the United Nations Conference on Trade and Development (UNCTAD 2019), world maritime trade lost momentum in 2018, with volumes expanding more slowly than historical averages. This deceleration was due to trade tensions and tariff escalation, mainly between China and the USA. Furthermore, with the COVID-19 pandemic, the shipping industry is facing important challenges, with a significant decrease in world trade. The shipping industry is a volatile and risky sector, characterized by freight rate instability, a high degree of financial commitment for investments in assets, strong competition among carriers (Notteboom et al. 2010), and remarkable concentration (at least in container shipping). In this regard, the UNCTAD (2019) also indicates that, cur
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