Which hedge fund’s collapse intensified the global market turmoil of 1998?

Long-Term Capital Management’s collapse intensified the global market turmoil of 1998.

Long-Term Capital Management, or LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent finance specialists and Nobel Prize-winning economists, and it used mathematical models to pursue relative-value trading strategies across international markets.

The fund suffered severe losses after Russia defaulted on domestic debt in August 1998. Market correlations changed abruptly, making many supposedly offsetting positions lose value at the same time. LTCM’s leverage made the losses especially dangerous for its counterparties and creditors.

The Federal Reserve Bank of New York helped coordinate a private-sector rescue in September 1998. The episode demonstrated how a large, interconnected, highly leveraged institution could threaten wider financial stability without being a commercial bank.