Authors: Spyros Repousis, Petros Lois, Georgios Georgopoulos

Title: Optimization of Capital Distribution and Composition of a Shipping Company Fleet through Evolutionary Algorithms

Abstract

Purpose – This research examines the management and optimization of  fleet management of the shipping company through the control algorithms. Finding an algorithm that will reduce a marine company's exposure to risk by diversifying its fleet composition is one way to make it dominant.

Design/methodology/approach – The evaluation was made by three supposed companies that choose a 2014 launch time to invest $ 1 billion in a fleet of tankers. The three companies optimized the fleet composition with three different techniques: Equal number of ships of all types, the established risk minimization model and the proposed Risky Asset Pricing maximization model. Data used for the synthesis was 7 years and for the evaluation 4 years.

Findings – Classic portfolio management through risk minimization is clearly ineffective as it seems to reduce performance below what is a random or evenly distributed fleet. Comparing three methods it is clear the superiority of the Risky Asset Pricing model by optimizing the fleet over the excess present value of ships with an effective over 25%, over an accidental fleet and over 60%, over the conventional minimum risk method. In essence, this algorithm looks for solutions where the demand for ships is low but has enormous fluctuation potential. It is basically looking to find ships that are at high risk with great potential for price increases to give the investor the potential big boom on which the most successful players in shipping operate.

Research limitations/implications – In the present study, due to a lack of access to a large number of historical data, perhaps data may be within the same shipping cycle. In order to draw safer conclusions, the composition should be at least 17 years old with current prices at present value.

Practical implications – The identification of methods to optimize capital distribution and composition of a Shipping Company Fleet aims to provide maritime companies, investors and agencies with valuable insight.

Originality/value – While existing literature focuses on Markowitz theory, this study instead describes how evolutionary algorithms can be used to optimize a fleet management.