Inferences about the Amaranth Case and the Emerging Maturity of the Hedge Fund Industry

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 effects on the hedge fund industry and the wider capital markets. This paper will focus on providing new inferences on the riskiness of Amaranth’s trading strategies.