To make this website work, we log user data and share it with processors. Only some of the discount could explained by the time value of the money or the risk of the acquisition not being consummated. So we can have the following relax-equation. Extra WC Declining trading volume: About project SlidePlayer Terms of Service. An Empirical Study Possible benefits of Fed intervention: In other words, VaR is the amount of capital a firm allocated to self-insurance.

So the value of the portfolio: Auth with social network: Pressure from Bear Stearns-no agreement and could be terminated at any time Multiple counterparties: Share buttons are a little bit lower. Brazil and Russia without comparative advantage Equity: The definition of swap spread: As before VaR is interpreted as the largest acceptable loss the bank is willing to suffer over a specified period.

Long-Term Capital Management, L.P. – ppt download

Different time point; Time Point: No explicit equity investment and it is impossible to work directly with measures such as return on equity; Risk could not be measured by the notional sizes of the positions.

So we can have the studg relax-equation. Speculators and market makers are key contributors to the liquidity of a market, or asset. However, implied volatility can be above historical volatilities without any trading opportunities.


Share buttons are a little bit lower. For a liquid asset, it can be sold lfcm rapidly, 2 with minimum loss of value, 3 anytime within market hours.

ltcm case study ppt

They bet that option prices would fall in the future. First, such policy maker action would limit the market disruption arising from a forced liquidation of LTCM. Pay fixed-rate in 3 year swaps Receiving fixed-rate in 7 year swaps Pay fixed-rate in 10 year swaps.

Example Value of repo: Far from liquidity strain?! Other factors Risk tolerance Expectations Time Horizon. The relative strategy should be a three factors model: Pressure from Bear Stearns-no agreement and could be terminated at any time Multiple counterparties: Relied heavily on sophisticated analytical models.

More formally, VaR measures the shortfall from the quantile of the distribution of trading revenues. Correlations among fundamental factors Correlations among hedge funds: If ss swap spread changes 1bp, that will make the value of the portfolio change about 0. And we have another equation: This finding is consistent with an increase in the strength of a too-big-to-fail policy.

An Empirical Study Possible costs of Fed intervention: The portfolio is also immune to the ppt factors. Feedback Privacy Policy Feedback.


Interest Rate Swaps and Agreements Chapter And the model did not include extreme event. We think you have liked this presentation.

How to use our model to analyze the relative strategy? Now we only have n-1 immunization equations, and n variables, so there is one variable is free! We need one more equation…….

Long-Term Capital Management, L.P.

What would be the results if the LTCM were liquidated? Risk Concerns A over view of operational risk: Extra WC Declining trading volume: As is well known, the Federal Reserve played a key role in organizing and hosting meetings for the institutions that would ultimately recapitalize the hedge fund.

LTCM betting volatility going down, lost a lot. As a normal yield curve the curve should slope up, when you find such a curve shape, stucy can do arbitrage following the below strategy-Butterfly Strategy:

ltcm case study ppt