Respect to the fund spread bet and use of leverage

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In 1998, Long-Term Capital Management (LTCM), a prestigious hedge fund, made highly leveraged bets on the spread between U.S. Treasuries and corporate bonds. At the same time, Russia defaulted on its sovereign debt, causing a worldwide financial panic. One result was the near collapse of LTCM. Discuss the reasons behind the near collapse of LTCM with respect to the fund’s spread bet and use of leverage.

Reference no: EM131566272

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