LTCMs Impact on the International Financial System
LONG TERM CAPITAL MANAGEMENT L.P. – A CASE STUDY Rarely if ever has a single firm had as tremendous an impact on international economics as Long Term Capital Management L. P. (LTCM). This report describes the company itself and its investment strategies, with particular attention paid to its international influence and importance. LTCM’s activities in the financial world ultimately caused a near-collapse in the entire international financial system. In fact, had the Federal Reserve Bank of New York (FRBNY) not intervened to coordinate a major buyout of LTCM after it sunk into insolvency, the entire financial system could have been seriously jeopardized. Set up as a particularly large hedge fund, and comprised of Ph.D. economists and established Wall Street bond traders, LTCM is a very interesting case, as well as an extremely volatile and important fund. Key Members and Their Backgrounds Founded in part by Nobel laureates Robert Merton and Myron Scholes, LTCM based its investment strategies on the mathematical models developed by Scholes, Merton, and Fischer Black. The model itself, commonly known as the “Black-Scholes Options Pricing Model”, is famous for two major insights into economic th
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Approximate Word count = 3983
Approximate Pages = 16 (250 words per page double spaced)
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