Inferences About the Amaranth Case and the Emerging Maturity of the Hedge Fund Industry
10 Pages Posted: 24 Jul 2015
Date Written: November 25, 2006
The Amaranth case is surprising in many ways. It is definitely a surprise that a well-respected multi-strategy hedge fund could lose about $6-billion in little over a week. It is perhaps an even greater surprise that such a loss would have little knock-on effect on the hedge fund industry and the wider capital markets.
On October 2nd, the EDHEC Risk and Asset Management Research Centre (EDHEC-Risk) released a report on the early lessons from the Amaranth debacle. This paper will summarize this report. Given that there are no new material facts on this case as of the end of November 2006, this paper will focus on providing new inferences on the riskiness of Amaranth’s trading strategies.
Because we have the benefit of observing the past two months of stability in the hedge fund industry, we can draw new conclusions about the emerging maturity of the industry.
Keywords: Hedge fund, Amaranth, natural gas
JEL Classification: G11, G23
Suggested Citation: Suggested Citation