Can someone give a brief explanation of what happened with LTCM? What positions did they have on? What was the risk to the market as a result of it? Etc. Thanks
here is a decent explanation if anyone is interested http://www2.sjsu.edu/faculty/watkins/ltcm.htm guess I didn't need to start a thread after all.
Nova aired a very good overview of what happened to LTCM titled "Trillion Dollar Bet". Some good background and very good interviews of several key LTCM figures. http://www.pbs.org/wgbh/nova/stockmarket/ The transcript of the program is on the site with other LTCM related info. I called Nova at shopWGBH and was told that you cannot buy this tape unless you are an 'educator' but you can check it out through your local public library. Good luck,
Amazon appears to have it for sale: http://www.amazon.com/exec/obidos/tg/detail/-/1578072301/102-1705296-5620969?v=glance Here's the link to the transcript: http://www.pbs.org/wgbh/nova/transcripts/2704stockmarket.html
Perhaps those PhDs and Nobel laureates thought they can trade I guess with their degrees and their baggage of egos, they thought they can rule the market. I think these theoreticians better stick to their theories and leave the actual trading to the traders. Have a great weekend everyone, Maji
There is nothing in the Nova program that is not in the book or available from other sources on the web. However, I enjoyed seeing the faces of key individuals and hearing them describe key LTCM events in their own words during the interviews. The one thing that was disappointing to me about the program was that John Meriwether, the founder of LTCM, did not want to be interviewed for the program. Too bad. I am sure other people who viewed the program will have a different opinion. Good luck,
The bond spreads which they were betting on to revert back to their mean, eventually did. But not before spiraling out of control in the global chaos that ensued at the time. It's as if the market knew, or perhaps it just likes to spiral out of control by itself every few years, more than we think. Nevertheless, the large banks and institutions which the Fed forced to bail out LTCM actually made a profit from those bond spreads, because they eventually did revert back. So, technically, Genius didn't fail. Jay
Depends. You talking genius quants or genius traders? The story proves that they are in no way the same. Genius traders know about risk control. On that point they failed spectacularly.