Which hedge fund's 1998 collapse followed Russia's debt default and threatened the global financial system?

Long-Term Capital Management's 1998 collapse followed Russia's debt default and threatened the global financial system.

LTCM was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and economists, including Nobel Prize-winning economists Myron Scholes and Robert C. Merton. The fund used mathematical models and large borrowed positions to pursue convergence trades.

Russia's August 1998 default disrupted assumptions about how markets would behave. Prices that LTCM expected to move closer instead diverged, producing enormous losses. Because many banks and dealers were LTCM counterparties, a disorderly liquidation could have spread instability through financial markets.

The Federal Reserve Bank of New York organized a private-sector rescue in September 1998. A consortium of banks provided capital and took control of the fund; the U.S. government did not directly bail out LTCM. The episode became a landmark example of systemic risk created by leverage and interconnectedness.