Long-Term Capital Management was a hedge fund that collapsed in 1998 after aggressive leveraging and failed bets on bond markets forced a massive government-coordinated bailout. The firm had returned $2.7 billion to investors before imploding, triggering systemic financial risk that required intervention to prevent broader economic damage.
·LTCM used extreme leverage on complex derivatives and bond trades that unraveled during market stress
·The Federal Reserve orchestrated a $3.6 billion rescue package from major banks to prevent cascading failures
·The collapse exposed dangers of unchecked leverage and interconnected risk in unregulated hedge funds
·LTCM's near-failure became a cautionary tale that shaped post-crisis financial regulations
drawn from Investopedia, 24/7 Wall St., Yahoo Finance, dicardiology.com · updated 1d ago