@article {Chincarini91, author = {Ludwig B. Chincarini}, title = {The Amaranth Debacle}, volume = {10}, number = {3}, pages = {91--104}, year = {2007}, doi = {10.3905/jai.2007.700227}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The speculative activities of hedge funds have generated considerable interest among market agents and regulatory institutions. In September 2006, the activities of Amaranth Advisors, a large-sized Connecticut hedge fund in the natural gas market resulted in serious losses. By September 21, 2006, Amaranth had lost roughly $4.35B over a 3-week period or one half of its assets due to its activities in natural gas futures and options in September. Shortly thereafter, Amaranth fund was liquidated. This article presents a brief investigation of the possible causes behind this spectacular hedge fund failure and draws lessons by assessing Amaranth{\textquoteright}s trading activities within a standard risk management framework. Even by conservative measures, Amaranth was engaging in highly risky trades which in addition to high levels of market risk involved significant exposure to liquidity risk{\textemdash}a risk factor that is seemingly difficult to manage.TOPICS: Real assets/alternative investments/private equity, commodities, risk management, financial crises and financial market history}, issn = {1520-3255}, URL = {https://jai.pm-research.com/content/10/3/91}, eprint = {https://jai.pm-research.com/content/10/3/91.full.pdf}, journal = {The Journal of Alternative Investments} }