Long-Term Capital Management
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Long-Term Capital Management L.P. was an American hedge fund which used highly leveraged strategies. In 1998 when LTCM was on the verge of collapse, the fund received a $3.6 billion bailout from a gro
Robert C. Merton
The Federal Reserve Bank of New York (pictured), the site of a September 23, 1998, meeting to rescue LTCM; in attendance were representatives of Bankers Trust, Bear Stearns, Chase Manhattan, Goldman Sachs, J.P. Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley Dean Witter, and Salomon Smith Barney.
Black–Scholes model
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The Black–Scholes or Black–Scholes–Merton model is a mathematical model for the dynamics of a financial market containing derivative investment instruments. From the parabolic partial differential equ
Long-Term Capital Management
…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. LTCM was initially successful, with annualized returns (after fees) of around 21% in its first year, 43% in its second year and…
Simulated geometric Brownian motions with parameters from market data
The normality assumption of the Black–Scholes model does not capture extreme movements such as stock market crashes.