A hedge fund run by Nobel laureates Scholes and Merton, whose models cratered in the 1998 Russian debt default and forced a $3.6 billion Federal Reserve bailout.
Born
1994 CE
Died
2000 CE
Lived
6 years
Dead for
26 yrs
At its peak
~$125 billion in assets; leverage exceeding 25-to-1
Cause of death
Overreach
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.
Gallery
Robert C. Merton, Nobel laureate economist and LTCM principalPublic domainMyron Scholes, Nobel laureate economist and LTCM principal, at the 2008 Lindau Nobel Laureate MeetingsNobellaureatesphotographer · CC BY-SA 3.0
Sources
LTCM nearly collapsed in 1998, prompting a $3.6 billion bailout organized by the Federal Reserve, and was wound down by 2000 Wikipedia
Long-Term Capital Management, a hedge fund whose board included two Nobel laureates, lost about $4.6 billion within months in 1998 after Russia's debt default, prompting a Federal Reserve-organised $3.6 billion bailout by a consortium of banks. Federal Reserve History
A graveyard tradition: leave a stone to show you came, and remembered.
Buried nearby — by shared fate or a neighbouring lifespan.
