분야
pptReasons of Failure
Rescue Scenario
Lessons
LTCM and Subprime crisis
1994, John Meriwether, the famed bond trader from
Salomon Brothers founded a hedge fund called Long-Term Capital Management
Like all US hedge funds, LTCM was an unregistered private
investment limited partnership (LP) with very few reporting and regulatory controls on it apart from normal auditing
LTCM's main strategy -> make convergence trades.
These trades involved: finding securities, mispriced relative
to one another taking long positions in the cheap ones and short positions in the rich ones.
4 Types of trades:
Convergence among U.S., Japan, and European sovereign bonds;
Convergence among European sovereign bonds;
Convergence between on-the-run and off-the-run U.S. government bonds;
Long positions in emerging markets sovereigns, hedged back to dollars.