Cases in Financial Decision-Marking

  Case Study: Long-Term Capital Management, L.P.

Suggested Assignment Questions:

1. Would better supervision by financial intermediaries and better stress-testing by LTCM modelers have averted such an extreme outcome, or was the outcome inevitable based on LTCM’s investment strategy and magnitude of their portfolio leverage? 

2. Based on the LTCM debacle, was there truly a systemic risk? Hint: Pro or con, there is

no wrong answer. It’s how you support your argument that counts.