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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Moominoid who wrote (148270)2/4/2002 11:19:28 AM
From: KeepItSimple  Read Replies (3) of 436258
 
LTCM collapsed for ONE reason, and ONE reason alone.

The russians were paying out 20-30% interest rates on government bonds, and for a short while they had TONS of money flowing into their coffers. But eventually, enough people started cashing out that the whole fucking pyramid collapsed. Russia was essentially selling below-junk-bonds but everybody was buying them because they didn't believe Russia would ever default. Well, they did.

THAT is what brought down LTCM. Nothing else.

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LTCM were looking at spreads between yields on different securities from what I understand which should be mean reverting....
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