Actually, some proportion of LTCM's portfolio was actually selling volatility on equity options. If I recall this unit accounted for about ~20% of the losses. I

Actually, some proportion of LTCM's portfolio was actually selling volatility on equity options. If I recall this unit accounted for about ~20% of the losses. I think about another 15% came from linear equity arbitrage, mostly long-short positions on cross-listed stocks. Like you said, the bulk was fixed income arbitrage. It was actually pretty internally controversial when LTCM started selling options in the last year or two before its cratering. The core thesis of the firm was pure arbitrage, where the risk was inherently capped. When the more aggressive faction started pursuing "statistical arbitrages", positions that could lose money but tended not to when repeated long enough, the old-school vanguard from Salomon revolted. Ironically both the pure arbitrage and statistical arbitrage positions got crushed in 1998.