Ltcm Case Study

MSc in Finance 2011/2012

LONG-TERM CAPITAL MANAGEMENT

 delay of Content
1 Hedge Funds & shargond Funds
2 LTCMs employment Strategies

3 Movements & Effects
4 Risk Management 5 Beneficiaries and Victims 6 Could it happen again?



Sources

1 Hedge & correlative Funds (1/3)
At first glance, they might look corresponding Hedge Fund Mutual Fund

1 Hedge & Mutual Funds (2/3)
Mutual Fund Accessibility Regulation size of it For everyone Highly modulate to protect investors Huge 44% of Americans concur investments in them Hedge Fund For wealthy people in truth little regulation

Mutual Funds are less bump in nature than Hedge Funds
? They are more regulated ? They have director independence ? They offer greater transparency

1 Hedge & Mutual Funds (3/3)
Mutual Funds
? Liquidity ? style Intermediation ? variegation

Hedge Funds
? Custom strategies ? Denomination Intermediation ? Diversification ? managerial expertise ? Leverage allows for more profit opportunities ? frank return-to-risk ratio ? Low transparency ? Leverage can aim trouble ? Survivorship skews industrys performance results ? Fees

Advantages

? Cost advantages ? Managerial expertise ? Transparency ? Lower relative returns ? Fees

Disadvantages

2 Trading Strategies (1/3)
? Convergence take strategy: short an asset and long

other because you expect that prices will converge.
? Quantitative approach:
? Hoped for convergence surrounded by long-term off-the-run (old issuance)

and on-the-run (newly issued) US treasury bonds. ? Played convergence on European, Japanese and US sovereign bonds and among European bonds:
? Italian lira treasury bill rates versus Lira Libor

? Equity merchandise: ? Convergence of stocks of two companies announcing they will merge.

2 Limits to these Strategies (2/3)
? Convergence trade often gives profit as long as price

variations are normal:
? No external choc (forgot about 1973 oil crisis, 1987 crash) ? 2 founders of...If you want to get a full essay, order it on our website: Ordercustompaper.com



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