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Submitted by:
Group No. 10
Chaitali Kambli
20152066
Debashish Mishra
20152068
Aarti Vaishnaw -
20152070
Long Term Capital
Management
Case Study
1994 - John Meriwether, the famed Salomon Brothers bond
trader, founded a hedge fund called Long-Term Capital
Management.
All-star team of traders and academics
Sophisticated investors and large investment banks
$1.3 billion investment at inception
September 1998 LTCM reaches brink of ddefault
Fund loses substantial amount of investors equity
Threat of systemic crisis in world financial system
Federal reserve comes to the rescue with a rescue package
Rescue package worth $3.5 billion.
Participants receive 90% of funds equity
LTCM Strategy
The basic principle of LTCM strategy was that in
the long term, the price of a security would
converge to its fair market value even though
there may be mispricing in the short term
Thank You!