What was the name of the 1998 hedge-fund crisis that threatened global financial stability after Russia’s default?

The 1998 hedge-fund crisis that threatened global financial stability after Russia’s default was the Long-Term Capital Management crisis.

Long-Term Capital Management, or LTCM, was a large hedge fund founded in 1994. Its partners included prominent bond traders and Nobel Prize-winning economists. The fund used highly leveraged mathematical trading strategies and borrowed heavily from major financial institutions.

Russia’s debt default in August 1998 and turmoil in global markets caused many of LTCM’s positions to lose value at once. Because the fund was deeply connected to banks and dealers, its disorderly collapse might have created wider instability. The Federal Reserve Bank of New York helped arrange a private-sector rescue in September 1998; the government did not directly provide the bailout money.

The episode demonstrated that leverage and interconnectedness could make a single investment firm a systemic risk, even without being a commercial bank.