risk lessons from LTCM 部分内容如下： Risk Management Lessons from Long-Term Capital Management
ABSTRACT
The 1998 failure of Long-Term Capital Management (LTCM) is said to have
nearly blown up the world's financial system. For siich a near-catastrophic event,
the finance profession has precious little information to draw from. By piecing
together publicly available information, this paper draws lessons from risk man-
agement practices at LTCM.
LTCM's strategies are analyzed in terms of the fund's Valiie at Risk (VAR)
and the amount of capital necessary to support its risk profile. The paper shows
that LTCM had severely underestimated its risk due to its reliance on short-
term history and risk concentration. LTCM also provides a good example of risk
management taken to the extreme. Using the same covariance matrix to measure
risk and to optimize positions inevitably leads to biases in the measurement of
risk. This approach also induces the strategy to take positions that appear to
generate "arbitrage" profits based on recent history but also represent bets on
extreme events, like selling options. Overall, LTCM's strategy exploited the
intrinsic weaknesses of its risk management system.
JEL Classification Numbers: G-ll, G-13, G-14, G-23 |