The Collapse of Metallgesellschaft Harvard Case Solution & Analysis

Introduction:

This case is mainly dealing with two scenarios, one is dealing with the crude oil and gasoline’s future contractsfor XOMcompany and another company MG is using rolling strategy which is leading towards cash shortage which is needed to be filled by the company by contracting with the oil suppliers for reducing their risks of meeting the contract requirements at lower prices. It results in the huge losses for company by not predicting the prices according to its nature rather they followed the intense strategy to earn money quickly which resulted in the adverse direction by following the aggressive policy of hedging. So, to overcome this situation optimal hedging ratio has been calculated and the relative volatilities as well.

Question 1 Part a: Interpretation

Regression Statistics
Multiple R0.97546552
R Square0.95153298
Adjusted R Square0.950018386
Standard Error6441.188397
Observations100

 

ANOVA
 DFSSMSFSignificance F
Regression37819532138626065107129628.2427860.00
Residual96398293516541488907.97
Total9982178256551
 CoefficientsStandard Errort StatP-valueLower 95%Upper 95%
Intercept5451.7389571275.5285524.27410186             0.002919.8347927983.643122
X Variable 1562.831277264.740813198.693608397             0.00434.3217787691.3407757
X Variable 24473.559783508.92651638.790188051             0.003463.3486325483.770933
X Variable 3198.810589947.353567044.198429018             0.00104.8145023292.8066776

 

As it is mentioned in the excel sheets and assessment file that we are supposed to find out the relationship and impact of XOM revenues with respect to WIT crude oil prices, Henry Hub gasoline and Brent oil prices. In this case we have taken XOM revenues as independent variable whereas, dependent variables have been selected as WIT, Henry and Brent.

The-Collapse-of-Metallgesellschaft-Harvard-Case-Solution-Analysis

Regression analysis results show that the overall model is best fit model as all these factors are significantly impacting revenues which is around 97%. If we analyze each factor independently and individually, then all these factors are showing significance as their p-value is less than 5% which shows that the null hypothesis cannot be rejected as there lies a strong positive relationship of these prices on revenues.

Q1 part b Interpretation:

Therelation between hedge ratio and regression analysis is insignificant. As most of the values of hedge ratios are negative. In addition, regression analysis is showing insignificance and rejection of null hypothesis because their p-value is more than 5% and stats significance is also greater than 5%. Therefore, all the hedge ratios and regression analysis results are insignificant. Files have been attached in exhibits..........................

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