5 ms·
Reading "When Genius Failed" or whatever that book was that discussed the fall of LTCM, I thought LTCM failed because they started doing things their original m
by henning 17y ago
Reading "When Genius Failed" or whatever that book was that discussed the fall of LTCM, I thought LTCM failed because they started doing things their original mathematical models didn't cover, and assuming that Russia wouldn't default on its debt. They started doing straight up directional trading and other things that weren't safe or something to that effect.
- joe_the_user 17y agoI just have to comment here. There's a journalist style that loves to blame failure on some personal quality rather than on the structure of the system itself. Certainly, when it fell apart, I'm sure if one looked hard enough, one could find a "mistake" that LTCM made other than following an unsustainable system. But the invariant is that escalating leverage and escalating speculation is ultimately unsustainable, ultimately identical to a Ponzi scheme and will fail sooner or later - I mean, I'm sure you could find the "mistake" that brought Madoff down.