Amaranth's Risky Business

It appears risk management went out the window at Amaranth, the giant hedge fund that lost $4 billion on a bad bet on natural gas prices.

The six-year-old hedge fund's big gamble that natural gas prices would keep rising paid off for much of the summer. At one point, the Connecticut-based fund was up 20% for the year -- boosting its assets under management at one point to a little over $9 billion.

But in a span of a week, all those paper gains, and more, went up in smoke. Last week's sudden fall in the price of natural gas meant that the hedge fund ended up losing nearly four times as much as it had gained. ...