When Genius Failed: The Rise and Fall of Long-Term Capital Management

Összefoglaló

The book tells the story of Long-Term Capital Management (LTCM), an American hedge fund which commanded more than $100 billion in assets at its height. Among LTCM's principals were several former university professors, including two Nobel Prize-winning economists. The book is separated into two sections: the rise and the fall.Between 1994 and 1998, the fund showed a return on investment of more than 40% per annum. However, its enormously leveraged gamble with various forms of arbitrage involving more than $1 trillion dollars went bad, and in one month, LTCM lost $1.9 billion. On the precipice of not only an American financial disaster, the fund's imminent collapse had significant international monetary implications, jeopardizing the financial system itself. Prompted by deep concerns about LTCM's thousands of derivative contracts, in order to avoid a panic by banks and investors worldwide, the Federal Reserve Bank of New York stepped in to organize a bailout with the various major banks at risk.