Risk Notepad 7.1: What Is a Hedge Fund?LTCM: The CompanyThe LTCM BusinessThe PrincipalsLTCM’S StrategyIdentifying Small Market ImperfectionsUsing a Minimum of Equity CapitalSecuring Long-Term FundingCharging Hefty FeesLTCM’S Impressive Performance: 1994–1997LTCM’S Contributions to Efficient MarketsWhy and How LTCM FailedCatalyst #1: Exogenous Macroeconomic ShocksRisk Notepad 7.2: What Is Contagion?Catalyst #2: Endogenous ShocksThe Fed, Warren Buffett, and the Rescue of LTCM Risk Notepad 7.3: Another Look at Warren Buffett’s Offer for LTCM Conclusions and LessonsBe Careful What You Wish ForBeware of Model RiskAll for One and “1” for AllLeverage Is a Fair-Weather FriendFinancial Transparency Is the First Step in Meaningful ReformIn the Long Run, Bet on Global Financial Market EfficiencyYou Can’t Float Without LiquiditySome Things Are Worth Doing for the Greater Good — EpilogueWhat Happened to the Principals, Creditors, Investors, and Consortium?The Principals and EmployeesCreditors and InvestorsThe ConsortiumReview QuestionsBibliographyAppendix 7.1: Primer on LTCM’s Major Trades and Financial InstrumentsAppendix 7.2: UBS and the LTCM Warrant Deal