Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 8 pages
Data source: Published sources
Topics:
Long term capital management (LTCM); Hedge fund; John Meriwether; Convergence trades; Relative-value trades; Directional trades; High leverage of funds; Commercial mortgage backed bonds; Junk bonds; Warren Buffet; Societe Generale; Credit Agricole; BNP Paribas; US Federal Reserve bailout; US economy
Abstract
Long Term Capital Management fund (LTCM), one of the world''s largest hedge funds was known for many wrong reasons. LTCM, which was started by a group of renowned and experienced traders of Wall Street, took full advantage of the poor disclosure requirements of a hedge fund. LTCM was able to parlay its prestige built over the period of time into a virtually unlimited access to borrowed money. The fund managers took speculative positions on a bet that the asset prices would converge. In due course, the fund assets were leveraged higher than most other hedge funds. This case offers scope to discuss how the risk in convergence trading activity can affect the volatility of the asset prices, and on the risks arising from high leverage of the funds'' assets. A structured assignment ''104-060-4'' is available to accompany this case.
Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 8 pages
Data source: Published sources
Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 15 pages
Data source: Published sources
Topics:
Long term capital management (LTCM); Hedge fund; John Meriwether; Convergence trades; Relative-value trades; Directional trades; High leverage of funds; Commercial mortgage backed bonds; Junk bonds; Warren Buffet; Societe Generale; Credit Agricole; BNP Paribas; US Federal Reserve bailout; US economy
About
Abstract
Long Term Capital Management fund (LTCM), one of the world''s largest hedge funds was known for many wrong reasons. LTCM, which was started by a group of renowned and experienced traders of Wall Street, took full advantage of the poor disclosure requirements of a hedge fund. LTCM was able to parlay its prestige built over the period of time into a virtually unlimited access to borrowed money. The fund managers took speculative positions on a bet that the asset prices would converge. In due course, the fund assets were leveraged higher than most other hedge funds. This case offers scope to discuss how the risk in convergence trading activity can affect the volatility of the asset prices, and on the risks arising from high leverage of the funds'' assets. A structured assignment ''104-060-4'' is available to accompany this case.
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Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 8 pages
Data source: Published sources
Subject category:
Finance, Accounting and Control
Published by:
IBS Case Development Center
Length: 15 pages
Data source: Published sources
Topics:
Long term capital management (LTCM); Hedge fund; John Meriwether; Convergence trades; Relative-value trades; Directional trades; High leverage of funds; Commercial mortgage backed bonds; Junk bonds; Warren Buffet; Societe Generale; Credit Agricole; BNP Paribas; US Federal Reserve bailout; US economy