Which investment firm collapsed in 1998 after Russia's default worsened losses during a global market crisis?

Long-Term Capital Management collapsed in 1998 after Russia's default worsened losses during a global market crisis.

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 complex mathematical models and large positions in bond and derivatives markets.

Russia's government defaulted on domestic ruble-denominated debt and devalued the ruble on August 17, 1998. Investors then abandoned risky positions worldwide, causing spreads to widen and undermining LTCM's assumption that prices would converge in the expected way. The fund suffered enormous losses and faced the prospect of disorderly failure.

The Federal Reserve Bank of New York organized a private-sector recapitalization by major financial institutions in September 1998. The rescue did not use direct public money, but the episode became a landmark warning about leverage, derivatives, interconnected markets, and systemic risk.