Sovereign hedging lessons

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Potential hedging losses of $1 billion on a mark-to-market basis would represent a significant problem for any institution. When the company in question is government-owned and based in a country where very little use is made of derivatives, the problem becomes an even bigger issue.

Sri Lankan state oil refiner Ceylon Petroleum Corporation (CPC) saw the resignation of its chairman and suspension of its finance head late last year, after it emerged in November that the company's crude oil hedges

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