I have heard about LTCM so often, that I decided to check out what it is...Incidently today happen's to be the ninth anniversary of LTCM's debacle. :-)
Here is a detailed chronology of what happened at LTCM. Honestly I didnt understand the details of LTCMs strategy and what caused the screw up.
I have been following the finance news quite closely off-late and some of the causes of debacle of LTCM, and those of hedge funds like Golden Alpha or Bear Sterns are strikingly similar.
- Complex Mathematical Models.
- Heavy Leverage
- Atleast one unhedged risk going wrong.
Why is it not that we learn lessons from events just nine years away? Or is it that no one wants to learn the lessons at all, for they know, if I screw up, I am going to be bailed out.
For my friends who undertand sed. just do s/LTCM/"Golden Alpha" and s/Russian GKO/American Subprime
and everything else is same