The rise and fall of Long Term Capital Management
Planet Money
Navigating Relative Value Trading
This chapter explores the strategies used in relative value trading, focusing on identifying underpriced and overpriced assets. It highlights the significance of market irrationality in creating profit opportunities and the crucial steps in recognizing pricing discrepancies. Additionally, the chapter discusses the dual nature of leverage as a tool for amplifying returns and a risk factor that requires careful management, particularly illustrated through the experiences of Long Term Capital Management.
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