4 ms·
Hah I just read "When Genius Failed" after finding it at my parents house over Thanksgiving. I'd known about LTCM, it's a case study in 2nd year classes in pol
by snake_plissken 11y ago
Hah I just read "When Genius Failed" after finding it at my parents house over Thanksgiving. I'd known about LTCM, it's a case study in 2nd year classes in political economy/finance, and the book is a nice account of things.
LTCM's problem wasn't the BSM per-se, it was the fact that they went chasing after trading opportunities once the arbitrage space in bond/swap spreads had been, ironically, arbitraged away. In the process of doing this they leveraged themselves to the hilt and basically ran out of cash defending the positions.
- lintiness 11y agoa function of greed, not competition. if we can put up x% returns forever no matter what, why not add and add and add. they were believers, and with certainty comes danger.