Forward Freight Agreement (FFA)
A cash-settled derivative on a freight route that lets owners and charterers hedge or take a view on future freight rates.
- Category
- Markets and Pricing
- Abbreviation
- FFA
- Last reviewed
How it works
A Forward Freight Agreement (FFA) is a financial contract to settle the difference between a fixed freight price and the average of a published freight index over a future period. No ship or cargo changes hands; it settles in cash against the index.
FFAs let shipowners, charterers and traders hedge freight exposure or speculate on rate direction without physical positions. They are central to the paper freight market and are cleared on major exchanges.
Where it shows up on The Maritime
Also known as: FFA, forward freight agreement, paper freight.
Related terms
Worldscale (WS)
A unified index of nominal tanker freight rates that lets the market quote any tanker voyage as a single percentage.
Time Charter Equivalent (TCE)
A voyage’s daily earnings net of voyage costs: the single number that makes a voyage charter comparable with a time charter rate.
Dry Bulk Freight Index
A composite index tracking the average cost of moving major dry-bulk cargoes by sea: a barometer of dry-bulk demand.
More markets and pricing terms
A plain-English reference definition: our own explanation of a standard shipping concept, not a licensed source or legal advice. See the full glossary or the broader maritime dictionary.
Last reviewed: .