Twenty-Five to One — Oversized Drop-Shoulder T-Shirt

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TEE-ECO-CD-LTC-01-M-BK T-Shirt

Piece

Twenty-Five to One Oversized Drop-Shoulder T-Shirt

$ 2,345.00

Description

On 23 September 1998 the New York Federal Reserve put fourteen banks in a room to rescue a fund leveraged twenty-five to one and run by two Nobel laureates. The print is that ratio between capital and position.

A Author

Long-Term Capital Management

B Subject

Financial Mathematics

C Aesthetic

Diagram · Typographic

Exploration

The fund had two Nobel laureates in economics on its board, and a former vice-chairman of the Federal Reserve. Its strategy was to find tiny price differences between near-identical bonds and bet they would close, which is an operation that is almost always right.

The almost has to be made up with size. For a margin of pennies to yield a profit you have to move a great deal, and to move a great deal you have to borrow: twenty-five dollars for every one of your own, and at some moments considerably more.

Russia defaulted on its debt in August 1998 and every difference opened at once instead of closing. The model gave that so small a probability that it did not allow for it.

The New York Federal Reserve sat fourteen banks in a room until they agreed to put up the money. The fund was not rescued out of fairness: it was rescued because unwinding its positions all at once would have dragged down the people in the room.

Details