Long-Term Capital Management (LTCM) collapsed in 1998
Image: Unknown, dedicated to Bettmann Archive, Public domain, via Wikimedia Commons
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.
Related concepts
List of Call the Midwife episodes
Older financial institutions likely to survive longer
the disposition effect causes
Investors sell winners too early and hold losers too long
Fama–French three-factor model
Fama-French model adds size and value factors to CAPM
Risk parity
Risk parity allocates based on risk contribution, not capital allocation
Economic growth
How does more money, people, and machines affect a country's wealth?
2010 flash crash
Flash crash lasted 36 minutes
Educational content, not financial advice.
Swipe through 100 ML concepts daily
Open Pocket Polymath