Index-hire rates link the hire in a time charter to a market benchmark (e.g., Baltic Exchange routes), allowing both the owner and charterer to share market risk. If freight markets move significantly, neither party is heavily disadvantaged.
The calculated daily index-hire rate depends on how the Unpriced Component Form is configured in the time charter.
The system first calculates the adjusted market rate for each individual date in the averaging period. To determine which range’s calculation should be followed to determine the final calculated hire rate, the system calculates the average of the current market rate first, and then compares it against the ranges available. The formula of determined range is then applied, giving the final index hire rate.
An example is shown below:
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Hire period: 06/14/2025 to 06/14/2026
-
General Correlation: 0.9865625000
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Average period condition: Start from hire period start
-
Time offset: -1 months, i.e., -1 months is added to the average period start (i.e., average period starts from 05/01/2025 instead of 06/01/25)
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Ave Period: 1 month, i.e., each average period will be one month long (e.g., 05/01/2025 to 05/31/2025)
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Fill days: None (no market rate for weekends/holidays/leaves)
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Range:
|
Range |
Description |
Level |
Correlation |
Offset |
|---|---|---|---|---|
|
(, 12,500] |
For Adjusted Average Market rate smaller than and including 12500 |
12,500 |
0 |
12,500 |
|
(12,500, 15,000) |
For Adjusted Average Market rate between 12500 and 15000, excluding both |
0 |
1 |
0 |
|
[15,000, ) |
For Adjusted Average Market rate bigger than and including 15000 |
15,000 |
0.3 |
15,000 |
Calculation method:
-
Adjusted market rate for individual dates =
Individual market rates * General correlation, i.e.,
Individual market rate * 0.9865625000
For example, for average period, 09/01/2025 to 09/30/2025,
-
Adjusted average market rate =
Average market rate during the average period * General correlation
For average period, 09/01/2025 to 09/30/2025
-
Avg market rate: 16,510.36
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Adjusted avg rate: 16,510.36 × 0.9865625000 = 16,228.50
-
Range determination:
Since adjusted avg rate, 16,228.50 ≥ 15,000, it falls in range [15,000, ), i.e., bigger than 15000
-
Final index-hire rate calculation:
Using the formula for range [15,000, ),
(Index price - Level) * (Correlation) + (Offset)
final index-hire rate is calculated with Adjusted Market Rate for individual dates as the index price, as follows:
(Adjusted market rate for individual dates - 15000) * (0.3) + (15000)
