Which hedge fund's near-collapse intensified market fears after Russia's 1998 default?

Long-Term Capital Management’s near-collapse intensified market fears after Russia’s 1998 default.

Long-Term Capital Management, usually abbreviated LTCM, was a highly leveraged hedge fund founded in 1994. Its partners included prominent traders and economists, including Nobel Prize-winning economists Robert Merton and Myron Scholes.

The fund used mathematical models and borrowed heavily to pursue convergence trades. Russia’s August 1998 default and devaluation disrupted those assumptions, as investors moved away from risky assets and normally related prices diverged. LTCM suffered large losses and faced the possibility of disorderly liquidation.

The Federal Reserve Bank of New York organized meetings that led fourteen financial institutions to provide a private rescue package. The episode became a major example of systemic risk: a firm that was not itself a commercial bank could still threaten markets through leverage, interconnected positions, and forced selling.