Long-Term Capital Management

Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 that used complex mathematical models to identify and exploit small differences in financial markets. It borrowed heavily to amplify its investments, aiming for high returns with low risk. However, in 1998, a series of market crises caused losses that threatened to destabilize the fund and the broader financial system. This led to a coordinated effort by major banks and regulators to intervene and prevent a wider financial collapse. LTCM’s failure highlighted the risks of highly leveraged investing and complex risk management strategies.