Amaranth Lessons Thus Far

Hilary Till: In September 2006, Amaranth Advisors, LLC collapsed under the weight of losses, which were reported as $6.6-billion. Unfortunately, this meant that the fund had become responsible for the largest hedge-fund debacle to have thus far occurred.

Author(s):

Hilary Till

Research Associate, EDHEC-Risk InstitutePrincipal, Premia Capital Management, LLC

There were and 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, comparable in size to nationwide residential natural gas consumption, without any regulators noticing? Given the scale of Amaranth’s losses, why didn’t this debacle lead to wider systematic distress in the financial markets? This article will provide some answers to these questions by reviewing and analysing the publicly available information that is known as of this point.

Type: Working paper
Date: le 08/09/2008
Research Cluster : Finance

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