Abstract
In September 2006, Amaranth Advisors, LLC collapsed under the weight of losses, which were reported as $6.6-billion. This collapse triggered a debate on current risk management practices as well as a major investigation by the United States Senate. There are many surprising aspects of this debacle. How could a well-respected hedge fund implode so quickly? Could this multi-strategy hedge fund really have become one big bet on winter natural gas prices? How could Amaranth have amassed such huge derivatives positions in natural gas without any regulators noticing? Given the scale of Amaranth9s losses, why didn9t this debacle lead to wider systematic distress in the financial markets? This article will provide some answers to these questions by reviewing and analyzing the publicly available information that is known as of this point. Specifically it will address, Amaranth9s energy trading strategies, the fundamental rationale for these strategies, basic risk analyses and the U.S. government9s response.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
