FFA Contract Structure and Route Mapping
FFAs settle against route indices, so exposure quality depends on accurately mapping physical books to cleared paper routes.
Core Points
- Route code selection determines hedge effectiveness.
- Calendar granularity (month/quarter) affects tracking error.
- Clearing and margin terms shape liquidity usage.
Case Studies
Case: Route Basis Hedge Mismatch
A hedge built on a broad index route left residual exposure because the physical cargo mix was concentrated in a different lane.
Case: Quarter Strip Timing Error
Using a quarterly strip against a front-loaded physical schedule created timing mismatch and reduced hedge precision.
References
Last reviewed: 2026-03-21