Question 2. [9 marks] Background: Metallgesellschaft AG was formerly one of Germany's largest industrial conglomerates based in Frankfurt. It had over 20,000 employees and revenues in excess of 10 billion US dollars. It had over 250 subsidiaries specializing in mining, specialty chemicals (Chemetall), commodity trading, nancial services, and engineering (Lurgi). In 1993, the company lost 1.3 billion dollars suffering from flawed long hedge strategy in near term futures contracts that 1was meant to protect against forward sales commitments. A fall in spot prices forced margin calls for the company and the contracts were closed at a loss. Subsequently, the spot price increased and the company suffered even greater losses covering its customer commitments. It is debated whether the company was speculating after unwinding the long futures hedge since they became essentially exposed or naked against their forward customer commitments. from Wikipedia [https:lien.wikipedia.org/udldfMetallgesellschaft]