Which 1998 hedge fund collapse threatened global markets after Russia's debt default?

The 1998 hedge fund collapse that threatened global markets after Russia's debt default was Long-Term Capital Management.

Long-Term Capital Management, or LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and economists, including Nobel Prize winners Myron Scholes and Robert C. Merton. The fund used mathematical models and large positions in relative-value trades, expecting price relationships to return toward historical norms.

Russia's default and ruble devaluation in August 1998 caused investors to abandon risky assets and seek safer holdings. Correlations that LTCM's models treated as unusual persisted or widened, producing huge losses. Because the fund had borrowed heavily and dealt with many major financial institutions, its disorderly failure was considered a threat to the wider system.

The Federal Reserve Bank of New York helped coordinate a private-sector rescue in September 1998. Fourteen banks and securities firms provided capital in exchange for control of the fund. The rescue was not a US government bailout, though it became a landmark example of systemic-risk concerns.