Euler wrote:The upshot is they leverage massively and that's what busted them. I think there were leveraged something bizarre like 125-1
Euler wrote:Have a read of the book 'When genius failed' if you want the full story on LCTM.
The upshot is they leverage massively and that's what busted them. I think there were leveraged something bizarre like 125-1
Ferru123 wrote:Do you think that that the fact that the Black-Scholes model assumes that the market is rational (and therefore doesn't allow for crazy bubbles) was a contributing factor?
Wikipedia wrote:LTCM's equity tumbled from $2.3 billion at the start of the month to just $400 million by September 25. With liabilities still over $100 billion, this translated to an effective leverage ratio of more than 250-to-1
Euler wrote:Black-scholes is simply a brilliant equation and it can teach you a huge amount if you are prepared to study it in depth.
Euler wrote:LTCM, Dot com boom, Housing market, Now sovereign debt. You can't help but think that the whole system needs a complete reboot.
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