Discussion questions for MGRM - 3. What strategy does MGRM...

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Discussion questions for MGRM Note: please think about these questions when you read the article “The Collapse Of Metallgesellschaft: Unhedgeable Risks, Poor Hedging Strategy, Or Just Bad Luck?”. You are required to discuss these questions in your study groups before the class, and I will ask you to present your answers. 1. What is MGRM’s business? 2. What major risks does MGRM identify? What are potential strategies to hedge those risks? What major risks does MGRM fail to identify?
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Unformatted text preview: 3. What strategy does MGRM use? Will it work in theory? 4. What are the flaws in a stack-and-roll strategy? What are contango and backwardation, and why are they important to MGRM’s situation? Why is there often backwardation in the oil markets? 5. What are the assumptions MGRM make implicitly in their rollover strategy? How good are those assumptions? 6. What is one-to-one hedging strategy? Why is it not a good strategy for MGRM? What should MGRM do instead?...
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This note was uploaded on 10/31/2010 for the course NBA 6730 at Cornell University (Engineering School).

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