metallgesellschaft case

simhan

New Member
Hi David,

It was an excellenct screencast on Metallgesellschaft disaster. But can you tell me what they could have done which would have prevented the disaster.
thanks for the same
from
simhan
 

David Harper CFA FRM

David Harper CFA FRM
Subscriber
Simhan & Mudaltiru,

Thanks for finding it helpful. About "what could have been done," Crouhy says:

* MG should have mitigated the impact by requiring periodic cash settlements from its customers on the forwards (!)

* If managers had not taken such a large position in long futures, or if they had at least used put options as a hedge for their position, then the magnitude of the cash flow problem could have been reduced

* "Stress testing would have been helpful..."

David
 
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