Long-Term Capital Management: Difference between revisions
Jump to navigation
Jump to search
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
Line 3: | Line 3: | ||
See also: Hubris. and {{author|Charles Perrow}}’s super book, {{br|Normal Accidents}}, which wasn’t really about the financial markets but sure could have been. | See also: Hubris. and {{author|Charles Perrow}}’s super book, {{br|Normal Accidents}}, which wasn’t really about the financial markets but sure could have been. | ||
LTCM was a [[hedge fund]], founded in 1993, and stuffed to the gunwhales with splendid brainboxes and Nobel prize-winners, including at least one of the team who “solved” the problem of how to accurately price options with the [[Black-Scholes option pricing model]]. LTCM used their braininess, and the [[Black-Scholes]] model, to engage in [[leveraged]] [[arbitrage]], ultimately doing the world the large favour of testing the [[Black-Scholes]] model to destruction. | LTCM was a [[hedge fund]], founded in 1993, and stuffed to the gunwhales with splendid brainboxes and Nobel prize-winners, including at least one of the team who “solved” the problem of how to accurately price options with the [[Black-Scholes option pricing model]]. LTCM used their braininess, and the [[Black-Scholes]] model, to engage in [[leveraged]] [[statistical arbitrage]], ultimately doing the world the large favour of testing the [[Black-Scholes]] model to destruction. | ||
Destroy it they did, alas, in the process destroying their fund, and nearly taking the entire financial system with them. | Destroy it they did, alas, in the process destroying their fund, and nearly taking the entire financial system with them. |