scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 1,051
What is LTCM Definition LTCM started with just over 1 billion in initial assets and focused on bond trading The trading strategy of the fund was to make convergence trades which involve taking advantage of arbitrage between securities that are incorrectly priced relative to each other Due to the small spread in arbitrage opportunities the fund had to leverage itself highly to make money At the height of the fund in 1998 it had 5 billion in assets controlled over 100 billion and had positions whose worth amounted to over a 1 trillion LTCM was primarily engaged in what hedge fund practitioners call market-neutral arbitrage Its main holdings appear to have been long positions in bonds that it considered undervalued and short positions in bonds that it considered overvalued More specifically it bought high yielding less liquid bonds and junk corporate bonds and sold short low-yielding more liquid bonds When did it start and fail LTCM was formed in 1993 and was founded by renowned Salomon Brothers bond trader John Meriwether In Sept 1998 with the help of the Federal Reserve and its creditors the fund that nearly collapsed the global financial system in as a result of high-risk arbitrage trading strategies was bailed out and taken over A systematic meltdown of the market was prevented Whats the performance In 1994 the fund returned 199 percent after fees to its investors 428 percent in 1995 408 percent in 1996 and another 171 percent in 1997 By late 1997 the equity in LTCM had grown to over 7 billion In December 1997 however the fund returned 27 billion to its investors claiming diminished investment opportunities leaving equity of about 48 billion at the start of 1998 Why did it Collapse LTCM believed that in late 1997 and early 1998 partly as a consequence of the collapse of Asian countries in the summer of 1997 the yield spread between high and
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA