When Genius Failed - Wikipedia

Abstraction: Account of Long-Term Capital Management's collapse and Fed-organized bailout

Key points:

• LTCM was founded in 1993 by John Meriwether; Nobel laureates Myron Scholes and Robert Merton were partners; returned 40% in 1995-1996 using computer models
• At its height LTCM commanded over $100 billion in assets and positions 30x its capital; only 100 clients
• In 1998 market volatility caused LTCM to lose $553 million in a single day (August 21); within five weeks the fund was largely depleted
• Federal Reserve Bank of New York organized a $4 billion bailout in September 1998 from major investment banks to prevent systemic panic from thousands of derivative contracts
• Book by Roger Lowenstein received BusinessWeek's best business books of 2000; named a story of "hubris and financial peril" by the WSJ

Connections: Long Term Capital Management · Roger Lowenstein · Myron Scholes · Robert Merton · Financial Risk · Derivatives · Model Risk

Source: https://en.wikipedia.org/wiki/When_Genius_Failed