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

@article{Mello1995MATURITYSO,
  title={MATURITY STRUCTURE OF A HEDGE MATTERS: LESSONS FROM THE METALLGESELLSCHAFT DEBACLE},
  author={Ant{\'o}nio Sampaio Mello and John E. Parsons},
  journal={Journal of Applied Corporate Finance},
  year={1995},
  volume={8},
  pages={106-121}
}
  • A. Mello, J. Parsons
  • Published 1 March 1995
  • Business, Economics
  • Journal of Applied Corporate Finance
At the start of 1994 Metallgesellschaft AG, the 14th largest corporation in Germany, stood on the brink of bankruptcy as a result of more than $1 billion in losses from trading in oil futures. The futures trades were ostensibly a hedge for the firm's oil delivery contracts. How could a set of transactions which purportedly locked-in profits, making the firm safer, in fact lead the firm to bankruptcy? A critical problem was the mismatch in maturities between the company's delivery contract… 

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