LTCM: Luck, leverage and Δ $

To lose one fortune, Mr Meriwether, may be regarded as a misfortune. To lose two fortunes looks like carelessness.

John Meriwether, head of Long-Term Capital Management, and Mathis Cabiallavetta, departed head of UBS, must both face the fact that people rarely believe in coincidence and have only a passing notion of the laws of probability. It is obvious to the world, as it was apparently not obvious to their risk managers, that financial crises don't obey mathematical formulae.

Meriwether, who faute de mieux continues to run Long-Term Capital Management - the world's most inappropriately named and most infamously unhedged hedge fund - is no stranger to big losses in the treasury market. As head of fixed income at Salomon Brothers he was in charge when a subordinate, Paul Mozer, was discovered to have rigged the world's largest government bond market. The firm's failure to act promptly led to the resignation...