Which 1998 Russian debt crisis triggered a major collapse of the hedge fund Long-Term Capital Management?

The Russian financial crisis of 1998 triggered the major collapse of Long-Term Capital Management.

Russia devalued the ruble and announced a restructuring, or partial default, of domestic ruble-denominated debt on 17 August 1998. Investors rushed away from risky assets, and financial markets became unusually volatile. The turmoil damaged confidence in emerging-market debt and spread through international financial institutions.

Long-Term Capital Management, a highly leveraged U.S. hedge fund, had large positions designed to profit from small price differences. The crisis caused those relationships to behave differently from its models. Concern that an uncontrolled failure could destabilize markets led the Federal Reserve Bank of New York to help arrange a private-sector rescue in September 1998.

The Russian crisis was not the same event as the 1997 Asian financial crisis, although the episodes were connected through investor confidence and capital flows. Russia later benefited from higher oil prices and improved fiscal conditions, while the ruble’s devaluation changed the country’s economic path.