EDHEC Comments on the Amaranth Case: Early Lessons from the Debacle
Auteurs : Hilary Till Research Associate, EDHEC Risk and Asset Management Research Centre, and Principal, Premia Capital Management, LLC
We examine how Amaranth, a respected, diversified multi-strategy hedge fund, could have lost 65% of its $9.2 billion assets in a little over a week.
To do so, we take the publicly reported information on the fund's Natural Gas positions as well as its recent gains and losses to infer the sizing of the fund's energy strategies. We find that as of the end of August, the fund's likely daily volatility due to energy trading was about 2%. The fund's losses on 9/15/06 were likely a 9-standard-devation event. We discuss how the fund's strategies were economically defensible in providing liquidity to physical Natural Gas producers and merchants, but find that like Long Term Capital Management, the magnitude of Amaranth's energy position-taking was inappropriate relative to its capital base.
Créé le 4 septembre 2006
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Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.