LTCM Flashcards
1
Q
How did LTCM make money?
A
They specialized in the trading of similar assets with slightly different returns.
2
Q
What triggered the downfall of LTCM?
A
In 1998, Russia defaulted on their loans, and investors got scared. They pulled their money out of LTCM, and they could no longer payback their loans.
3
Q
How was LTCM saved?
A
The Fed of NY organized a rescue, and bought 90 percent of LTCM profits and control and control of the firm.
4
Q
What is moral hazard?
A
If companies could be bailed out, they would feel no moral responsibility to make good decisions.
