Risk of Ruin cover image

Inside Long Term Capital

Risk of Ruin

CHAPTER

The Secret Sauce of the Market

Merriweather traders' core strategy was convergence, or relative value trades. For example, a newly issued 30-year treasury might trade at a premium to a six months old one. Merriweather's traders would short the expensive bond and buy the cheap bond. The profit comes if the yield on these two bonds converges.

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