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> Disdain for LTCM isn't exactly an iconoclastic, or even interesting, position to take. How many people took that position before it blew up?
by pdog 9y ago
> Disdain for LTCM isn't exactly an iconoclastic, or even interesting, position to take.
How many people took that position before it blew up?
- tptacek 9y agoFamously, Taleb is supposed to have predicted LTCM. I've read FBR and Swan, but not recently, and took a couple minutes to try to track down the details of this prediction, with little luck. I found numerous references to his having predicted the demise of hedge funds "like" LTCM (my clock will also strike 4:23 at least twice in the next 24 hours). Does anyone have a good cite for this?
- defen 9y agoI'm not sure he called them out by name. If you read `Against VAR` [1] from 1997 (LTCM blew up in 1998) you see basically all the ideas of The Black Swan / Fooled By Randomness. LTCM was doing all the things that he says are risky. The guy who wrote "In Defense of VAR" on that same page subsequently wrote "Risk Management Lessons from Long-Term Capital Management"[2]. Also in Taleb's 1997 book "Dynamic Hedging", chapter 9 "Vega and the Volatility Surface" talks about liquidity as one of the pre-eminent risks of an option book (as opposed to individual option positions). [1] http://www.derivativesstrategy.com/magazine/archive/1997/0497fea2.asp http://www.derivativesstrategy.com/magazine/archive/1997/049... [2] https://merage.uci.edu/~jorion/papers/ltcm.pdf https://merage.uci.edu/~jorion/papers/ltcm.pdf