Walk a margin-call liquidity squeeze
Use risk appetite and escalation discipline to respond to a liquidity squeeze on a commodity book.
Liquidity squeeze The hedge is tied to physical supply, but cash margin is due before physical cash arrives. The risk has shifted from final economics to funding the path. COSO ERM Risk appetite includes survival constraints Performance goals do not matter if the desk cannot fund the path to convergence. Shortcut Argue the market view and hope treasury catches up. The firm protects convergence without pretending cash timing is irrelevant. When cash timing becomes the constraint, liquidity is the trade. Mandate Separate exposure The short futures hedge is linked to physical purchases, but there is also an unrelated short put…
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