What was the name of the 1998 hedge fund whose near-collapse threatened financial stability after the Asian crisis?

Long-Term Capital Management was the 1998 hedge fund whose near-collapse threatened financial stability after the Asian crisis.

LTCM was founded in 1994 by John Meriwether and employed prominent economists and financial experts, including Nobel Prize winners Myron Scholes and Robert C. Merton. It used highly leveraged mathematical trading strategies that sought small pricing differences across markets.

The Russian financial crisis of August 1998 and wider market turmoil caused many of LTCM’s positions to move against it. Because the fund had borrowed heavily and traded with numerous major institutions, a disorderly failure could have forced rapid asset sales and transmitted losses through the financial system.

The Federal Reserve Bank of New York helped organize a private-sector recapitalization by a group of banks and investment firms. The Federal Reserve did not directly provide the bailout money or take ownership of LTCM. The episode became a major warning about leverage, complex derivatives, and the risk that a relatively small institution can have a large network effect.