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Time Charter Swaps

Freight derivatives settling against time charter indices, used to hedge exposure to vessel hire rates.

A time charter swap is a derivative contract used in shipping and oil markets to hedge or speculate on charter rates over a defined period. It decouples exposure from owning vessels while managing transportation cost risk.

For example, an oil trader concerned about rising tanker rates might enter a time charter swap to fix shipping costs for crude deliveries over three months. Payments are settled financially based on actual charter rates versus agreed levels.

Time charter swaps provide cost certainty, cash flow predictability, and operational risk management. They are widely used in energy trading, maritime logistics, and derivative markets.

By using time charter swaps, participants optimize supply chain planning, reduce exposure to shipping volatility, and improve trade profitability while maintaining flexibility in operational execution.

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