Long-Term Capital Management (LTCM) collapsed in 1998
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Capital gains tax
Long-Term Capital Management (LTCM) collapsed in 1998
LTCM's failure highlighted the limitations of even sophisticated financial models. Despite using Nobel Prize-winning techniques, LTCM's excessive leverage and reliance on high-risk strategies led to its downfall.
Example
LTCM had borrowed $1.3 billion to invest in derivatives, but when Russia defaulted on its debt, LTCM's positions lost billions in a short period.
Remember this
LTCM's collapse demonstrated the dangers of high leverage and the need for risk management in financial markets.
Text adapted from Wikipedia, licensed under CC BY-SA 4.0.
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