The Obituary
LTCM was a hedge fund founded in 1994 by former Salomon Brothers trader John Meriwether, with a partnership that included Nobel economists Myron Scholes and Robert Merton. Its mathematical models exploited tiny price discrepancies in bond markets, amplified by leverage that at times exceeded 25 to 1. The strategy delivered spectacular early returns. In 1998 the Russian debt default sent markets in directions the models had judged nearly impossible, and the fund lost billions in weeks. Fearing systemic collapse, the Federal Reserve organized a $3.6 billion bailout by major banks. The fund was wound down by 2000.
Worth remembering
- Its principals included Nobel Prize winners Myron Scholes and Robert Merton, pioneers of options pricing.
- Its 1998 near-collapse forced a $3.6 billion rescue coordinated by the Federal Reserve to prevent wider contagion.
Sources
- LTCM nearly collapsed in 1998, prompting a $3.6 billion bailout organized by the Federal Reserve, and was wound down by 2000 Wikipedia
- LTCM's board included Nobel laureates Myron Scholes and Robert Merton Encyclopaedia Britannica
A graveyard tradition: leave a stone to show you came, and remembered.