Which Russian financial event in 1998 contributed to the collapse of Long-Term Capital Management?

The 1998 Russian debt default contributed to the collapse of Long-Term Capital Management.

On August 17, 1998, Russia devalued the ruble, defaulted on domestic ruble-denominated debt, and imposed a temporary moratorium on some foreign debt payments. The announcement intensified global risk aversion and caused investors to sell assets considered less liquid or less creditworthy.

Long-Term Capital Management, a highly leveraged U.S. hedge fund, suffered large losses because many of its trades depended on normally stable price relationships. As markets became unusually volatile and correlations changed, counterparties feared a disorderly failure.

The Federal Reserve Bank of New York helped arrange a private-sector rescue in September 1998. The central bank did not provide a taxpayer-funded bailout to LTCM, but it coordinated negotiations among major financial institutions. The Russian crisis therefore became a global financial shock rather than a problem confined to Russia.