--%>

Example of Margin Hedging in Metallgesellschaft

Explain an example of Margin Hedging in Metallgesellschaft and Long Term Capital Management.

E

Expert

Verified

Illustrations where margin has caused important damage are Metallgesellschaft and Long Term Capital Management. Writing options is extremely risky. The downside of buying an option is only the initial premium, the upside may be limitless. The upside of writing an option is limited, but the downside could be vast. For this reason, to cover the risk of default in the event of an unfavourable outcome, the clearing houses which register and settle options insist on the deposit of a margin with the writers of options.

   Related Questions in Financial Management

  • Q : Major types of international bond

    In brief define each of the major types of international bond market instruments, noting their distinguishing characteristics.The major kind of international bond instruments & their distinguishing characteristics are as follows:

  • Q : Where is Crash Metrics Used Where is

    Where is Crash Metrics Used?

  • Q : Explain the Modern portfolio theory

    Explain the Modern portfolio theory.

  • Q : Usefulness of inspecting countrys

    Why would it be useful to inspect a country's balance of payments data?It would be useful to inspect a country's BOP for at least two reasons. Firstly, BOP provides detailed information regarding the supply & demand of the country's currency

  • Q : Dfd A bank sells a $3,000,000 FRA for a

    A bank sells a $3,000,000 FRA for a three-month period beginning three months from today and ending six months from today. The purpose of the FRA is to cover the interest rate risk caused by the maturity mismatch from having made a three-month Eurodollar loan and having accepted a six-month Eurodol

  • Q : Explain Treasury bill and risk involved

    Explain Treasury bill and risk involved with it.

  • Q : Corporation Briefly define the Terms

    Briefly define the Terms Corporation, partnership and proprietorship.

  • Q : Additional Fund Needed what happens to

    what happens to company when additional fund is not required?

  • Q : JIT II describe the operational

    describe the operational benefits of jit system

  • Q : BEP From books of Aggarwal Bors,

    From books of Aggarwal Bors, following information has been extracted: Rs. Sales 2,40,000 Variable costs 1,44,000 Fixed costs 26,000 Profit before tax 70,000 Rate of tax 40% Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is e