MATURITY STRUCTURE OF A HEDGE MATTERS: LESSONS FROM THE METALLGESELLSCHAFT DEBACLE

摘要: At the start of 1994 Metallgesellschaft AG, 14th largest corporation in Germany, stood on brink bankruptcy as a result more than $1 billion losses from trading oil futures. The futures trades were ostensibly hedge for firm's delivery contracts. How could set transactions which purportedly locked-in profits, making firm safer, fact lead to bankruptcy? A critical problem was mismatch maturities between company's contract exposure price risk and portfolio Although long-term prices, it hedged with short- dated order capture profits perceived mispricings that market. When gamble did not pay off, undermined entire company. Understanding mistakes made by is if other firms are avoid similar fate without forsaking significant benefits available correctly planned hedging strategy.