Long-Term Capital Market(LTCM)

What is LTCM? Definition: LTCM started with just over $1 billion in initial assets and focused on bond trading. The trading strategy of the fund was to make convergence trades, which involve taking advantage of arbitrage between securities that are incorrectly priced relative to each other. Due to the small spread in arbitrage opportunities, the fund had to leverage itself highly to make money. At the height of the fund in 1998 it had $5 billion in assets, …

…associated average daily value-at-risk over the prior quarter and year and what assumptions underlie those calculations, and the nature of their past losses and potential future exposures. Finally, Short of a wholesale restructuring of the banking and regulatory system, such as adopting some form of "collateralized bank" system, a proposal that deserves careful consideration is to require banks to maintain a certain proportion of their capital requirements in the form of uninsured, junior, short-maturity debt.