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From the LTCM history When Genius Fails, I gather they wait for prices of equivalent bonds,stocks etc, to converge to the same value. Okay, so a US treasury bo
by zandorg 18y ago
From the LTCM history When Genius Fails, I gather they wait for prices of equivalent bonds,stocks etc, to converge to the same value.
Okay, so a US treasury bond is equivalent to a UK treasury bond, except it's off by 0.0005%. So you buy billions/trillions of each and the price converges, and you make millions.
- mhb 18y agoWell, yes. That's what arbitrage is and in what you would expect hedge funds to engage. Only they do much riskier things than that. Hence my comment.