Metallgesellschaft's hedging debacle: what went wrong and lessons learned

Anand Shetty and John Manley

International Journal of Business Continuity and Risk Management, 2019, vol. 9, issue 2, 97-116

Abstract: This paper reviews various aspects of the energy-derivatives marketing and hedging program of Metallgesellschaft (MG) and its hedging strategy. Specifically, the paper looks at the program's risk exposures, cash flow problems, and the developments that led to the termination of the program by MG's management. The criticisms of the hedging program, the impact of MG's action of abruptly terminating the program, and whether the program involved speculation are discussed. The paper concludes with observations on the lessons learned from MG's hedging debacle.

Keywords: stack-and-roll hedge; strip hedge; basis risk; rollover risk; backwardation; contango. (search for similar items in EconPapers)
Date: 2019
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