Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund. In 1998, it received a 3.6billionbailoutfromagroupof14banks,inadealbrokeredandputtogetherbytheFederalReserveBankofNewYork.LTCMwasfoundedin1994byJohnMeriwether,theformervice−chairmanandheadofbondtradingatSalomonBrothers.MembersofLTCM′sboardofdirectorsincludedMyronScholesandRobertC.Merton,whothreeyearslaterin1997sharedtheNobelPrizeinEconomicsforhavingdevelopedtheBlack–Scholesmodeloffinancialdynamics.LTCMwasinitiallysuccessful,withannualizedreturns(afterfees)ofaround214.6 billion in less than four months due to a combination of high leverage and exposure to the 1997 Asian financial crisis and 1998 Russian financial crisis. The master hedge fund, Long-Term Capital Portfolio L.P., collapsed soon thereafter, leading to an agreement on September 23, 1998, among 14 financial institutions for a $3.65 billion recapitalization under the supervision of the Federal Reserve. The fund was liquidated and dissolved in early 2000.
John Meriwether headed Salomon Brothers' bond arbitrage desk until he resigned in 1991 amid a trading scandal. According to Chi-fu Huang, later a Principal at LTCM, the bond arbitrage group was responsible for 80–100% of Salomon's global total earnings from the late 1980s until the early 1990s.
In 1993 Meriwether created Long-Term Capital as a hedge fund and recruited several Salomon bond traders; Larry Hilibrand and Victor Haghani in particular would wield substantial clout and two future winners of the Nobel Memorial Prize, Myron Scholes and Robert C. Merton. Other principals included Eric Rosenfeld, Greg Hawkins, William Krasker, Dick Leahy, James McEntee, Robert Shustak, and David W. Mullins Jr.
The company consisted of Long-Term Capital Management (LTCM), a company incorporated in Delaware but based in Greenwich, Connecticut.
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This thesis develops models for three problems of liquidity under asymmetric information.
In the chapter "Disclosures, Rollover Risk, and Debt Runs" I build a model of dynamic debt
runs without perfec
Long-Term Capital Management L.P. (LTCM) was a highly leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York. LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Members of LTCM's board of directors included Myron Scholes and Robert C. Merton, who three years later in 1997 shared the Nobel Prize in Economics for having developed the Black–Scholes model of financial dynamics.
The 2007–2008 financial crisis, or Global Financial Crisis (GFC), was a severe worldwide economic crisis that occurred in the early 21st century. It was the most serious financial crisis since the Great Depression (1929). Predatory lending targeting low-income homebuyers, excessive risk-taking by global financial institutions, and the bursting of the United States housing bubble culminated in a "perfect storm". Mortgage-backed securities (MBS) tied to American real estate, as well as a vast web of derivatives linked to those MBS, collapsed in value.
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions of people losing their jobs and many businesses going bankrupt. The U.S. government intervened with a series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA).
The course provides a market-oriented framework for analyzing the major financial decisions made by firms. It provides an introduction to valuation techniques, investment decisions, asset valuation, f
The course provides a market-oriented framework for analyzing the major financial decisions made by firms. It provides an introduction to valuation techniques, investment decisions, asset valuation, f
We build a dynamic agency model in which the agent controls both current earnings via short-term investment and firm growth via long-term investment. Under the optimal contract, agency conflicts can i
This thesis develops three models that study the motivation of various agents to take on debt,
and the impact that excessive financial leverage can have on social welfare.
In the chapter "Short-term B