Unbounded Irrationality: Risk and Organizational Narcissism at Long Term Capital Management

2003 ◽  
Vol 56 (5) ◽  
pp. 523-540 ◽  
Author(s):  
Mark Stein
2018 ◽  
pp. 49-68 ◽  
Author(s):  
M. E. Mamonov

Our analysis documents that the existence of hidden “holes” in the capital of not yet failed banks - while creating intertemporal pressure on the actual level of capital - leads to changing of maturity of loans supplied rather than to contracting of their volume. Long-term loans decrease, whereas short-term loans rise - and, what is most remarkably, by approximately the same amounts. Standardly, the higher the maturity of loans the higher the credit risk and, thus, the more loan loss reserves (LLP) banks are forced to create, increasing the pressure on capital. Banks that already hide “holes” in the capital, but have not yet faced with license withdrawal, must possess strong incentives to shorten the maturity of supplied loans. On the one hand, it raises the turnovers of LLP and facilitates the flexibility of capital management; on the other hand, it allows increasing the speed of shifting of attracted deposits to loans to related parties in domestic or foreign jurisdictions. This enlarges the potential size of ex post revealed “hole” in the capital and, therefore, allows us to assume that not every loan might be viewed as a good for the economy: excessive short-term and insufficient long-term loans can produce the source for future losses.


CFA Digest ◽  
2000 ◽  
Vol 30 (1) ◽  
pp. 76-78
Author(s):  
David B. Miyazaki

Quipukamayoc ◽  
2014 ◽  
Vol 6 (12) ◽  
pp. 13
Author(s):  
Pascual Chávez Ackermann

Desde los primeros días de junio, han ocurrido una serie de extraordinarios acontecimientos en los mercados financieros mundiales que, si se analizan cada uno de ellos por separado, no parecen tener mayor significado. Pero, si estos hechos se consideran como parte de un solo proceso global, entonces no podemos llegar sino a la conclusión de que ya ocurrió a principios de junio otro desastre financiero, parecido a la quiebra en setiembre de 1998 del fondo financiero de apuestas especulativas LTCM (Long Term Capital Management), y que se pusieron en marcha una serie de esfuerzos de alto nivel para ocultar la realidad o para administrar la crisis, todo ello para prevenir que cunda el pánico en los mercados financieros internacionales. En un discurso pronunciado ante la Casa Mansión en Londres el 10 de junio, el gobernador del Banco de Inglaterra, Eddie George, recalcó cuán cerca había llegado el mundo a la desintegración financiera en el otoño de 1998. "La última vez que estuvimos aquí para esta espléndida ocasión, yo sugerí que estábamos viviendo en un ambiente económico y financiero internacional peligroso. Estas fueron palabras fuertes para un banquero central -pero quizás no lo suficientemente fuerte-. Ese ambiente rápidamente empeoró en el transcurso del otoño, y para las fechas de la reunión anual del FMI (Fondo Monetario Internacional), en octubre, ya todo mundo hablaba de una desintegración financiera global y una próxima recesión mundial, lo que no era simplemente hipérbole periodística".


2019 ◽  
pp. 28-55
Author(s):  
Hyun Song Shin

An example of a hedge fund illustrates a long-short strategy that maximises expected returns subject to a Value-at-Risk strategy. Balance sheet capacity depends on the measured volatility of asset returns and the book equity of the long-short hedge fund. The principles are illustrated by the case of Long Term Capital Management (LTCM).


2012 ◽  
Vol 52 (1) ◽  
pp. 55-69 ◽  
Author(s):  
Nathalie Vicente Nakamura Palombini ◽  
Wilson Toshiro Nakamura

Many studies have been conducted in corporate finance regarding long-term investment and financing decisions. However, short-term asset investments play a significant role in the balance sheet of companies. Moreover, financial managers dedicate significant amounts of time and effort to the subject of working capital management, balancing current assets and liabilities. This paper provides insights regarding the key factors of working capital management by exploring the internal variables of a number of companies. This study used data from 2,976 Brazilian public companies from 2001 to 2008, and found that debt level, size and growth rate can affect the working capital management of companies.


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