Margin notes
Brett Humphreys explains how to measure and manage margin risk, an often-overlooked – yet often-significant – risk exposure
Despite being laid off from his job at a power trading company, Joe Risk Manager is feeling pretty good. He has landed on his feet as the new chief risk officer for a small oil producer called Risky Oil. The firm can produce 10 million barrels of oil a year, but operates on very thin profit margins, producing at an average cost of $23 a barrel (bbl). In addition, the company carries significant debt. Given this situation Joe helped the company implement a policy of hedging its
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