http://hedge.lu/index.php?action=history&feed=atom&title=When_a_lack_of_hedging_leads_to_ruinWhen a lack of hedging leads to ruin - Revision history2026-09-22T19:30:28ZRevision history for this page on the wikiMediaWiki 1.28.2http://hedge.lu/index.php?title=When_a_lack_of_hedging_leads_to_ruin&diff=45&oldid=prevHector at 15:05, 24 June 20172017-06-24T15:05:08Z<p></p>
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</table>Hectorhttp://hedge.lu/index.php?title=When_a_lack_of_hedging_leads_to_ruin&diff=44&oldid=prevHector: Created page with "== Firms Involved == * Renderi AB Slite == Year of the event == 1992 == Description of the case == Slite was a Swedish shipping company running a ferry line between Sweden a..."2017-06-24T15:04:50Z<p>Created page with "== Firms Involved == * Renderi AB Slite == Year of the event == 1992 == Description of the case == Slite was a Swedish shipping company running a ferry line between Sweden a..."</p>
<p><b>New page</b></p><div>== Firms Involved ==<br />
* Renderi AB Slite<br />
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== Year of the event ==<br />
1992<br />
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== Description of the case ==<br />
Slite was a Swedish shipping company running a ferry line between Sweden and Finland. It had ordered a new ship built by the German company Meyer Werft and was supposed to take delivery of it, and hence proceed to the payment in 1992. When it had ordered the ship, Slite had decided not to hedge the transaction. Indeed, the DEM and the SEK were both members of the European Monetary System, and were both moving within the "monetary serpent". The volatility of the two currency was thus very small. However, the SEK was unpegged from the DEM in September 1992, leading the SEK to lose 30% to the DEM. The price of the ship to be received had just been increased by 30%. Slite could not afford this price, and went bankrupt in 1993.<br />
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== Take-aways ==<br />
* Hedging is there to protect from large deviations: it helps make a company antifragile, ie. immune to black swans<ref>[http://www.fooledbyrandomness.com/ Nassim Nicholas Taleb's website]</ref>.<br />
* When there is a risk of ruin, one must be ready to engage in costly hedging programs. They actually increase the value of the company by reducing or eliminating the costs associated to financial distress.<br />
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== References ==<br />
<references /></div>Hector