Amaranth Advisors LLC (AA) was a hedge fund based in Greenwich, Connecticut, that lost more than $6 billion during the first 3 weeks of September 2006, with more than 70% of the value lost in just the last week of its existence. At the time, its lead energy derivative trader, Brian Hunter, had the dubious distinction of having lost more money than any trader in the history of all hedge funds.

This financial collapse had three major causes: (1) a portfolio that was excessively weighted with energy-related derivatives, (2) a lack of sufficient liquidity, and (3) extremely large and unfavorable changes in natural gas prices. Regulation was also brought under the magnifying glass because AA was allowed to increase its positions to unhealthy levels. For instance, ...