The rise and fall of Long-Term Capital Management
???? UNDER THE LAMPLIGHT-
The mother of all market meltdowns: When Genius Failed chronicles the rise and fall of hedge fund Long-Term Capital Management, headed by Nobel Prize laureate economists and renowned Wall Street traders, was wildly successful for four years and in its heyday, with annualized returns of around 40% its second and third years, before it suddenly incurred enormous losses (USD 4.6 bn) in less than four months in 1998. The nosedive endangered the stability of not just Wall Street's largest banks but the entirety of the financial system, forcing the US government to step in to prevent financial markets from collapsing brokering a USD 3.65 bn bailout from 14 banks. Drawing interviews with key individuals and confidential internal notes, journalist Roger Lowenstein explains how Long Term’s partners’ personalities, the hubris of their mathematical certainty, and Wall Street culture played a part in the fund’s staggering success and eventual downfall.