

They Tried to Outsmart Wall Street - physcab
http://www.nytimes.com/2009/03/10/science/10quant.html?_r=1&hp

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dmh2000
> Long Term Capital Management, a highly leveraged hedge fund whose directors
> included the two Nobelists, collapsed and had to be bailed out to the tune
> of $3.65 billion by a group of banks.

$3.65 billion? that seems rather quaint these days.

~~~
Rod
Indeed. In retrospect, it's somewhat ironic that the group of banks that
bailed out LTCM included Merrill Lynch, Lehman Brothers, and AIG. The
"bailers" became the "bailees".

~~~
sachinag
You know who didn't bail out LTCM? Bear Stearns - the first to fall. They
wouldn't play ball and it's widely assumed that the other banks saw a chance
to make them pay.

~~~
falsestprophet
Maybe. But the banks have a _relentlessly resourceful_ profit motive. More
likely, the regulators were more keen to hang them out to dry for not
cooperating with LTCM.

Also, Bear Stearns always was a much smaller and weaker institution. Maybe
they simply couldn't afford the risk then and now.

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dbul
Exactly. If you want to be good in options trading, be good at physics.
Acceleration and deceleration of options values are very interesting (and very
valuable) in volatile markets. And as the article states there is no _Pi_
solution. It's simply fun to apply physics to financial markets when
applicable.

------
Rod
If you don't subscribe to NYTimes, you can read the article at:
<http://www.iht.com/articles/2009/03/10/business/10quant.php>

