LTCM CASE ANALYSIS,

OPTION STRATEGY AND CDS

GROUP 6 GROUP 7
NIHARIKA SHAH 20182043 MAYUR RATHOD 20182037

PRADGNYA SHAH 20182044 NIRAJ SAHLOT 20182038

SHWETA SINGH 20182051 DIYA SHAH 20182040
DHAIRYA SONI 20182052 DHAWAL SHAH 20182041

ZAHID THAKUR 20182053 NIHAL SHAH 20182042

INTRODUCTION

Long-Term Capital Management (LTCM) was a large hedge fund led by Nobel
Prize-winning economists and renowned Wall Street traders. The firm was
wildly successful from 1994-1998, attracting more than $1 billion of investor
capital with the promise of an arbitrage strategy that could take advantage of
temporary changes in market behavior and, theoretically, reduce the risk level
to zero.
PROBLEMS FACED BY COMPANIES
SOLUTION
IMPACT OF SOLUTION
Recommendation
CDS
IORN BUTTERFLY

• In this strategy, an investor will sell an at-the-money put and buy an out-of-
the-money put, while also selling an at-the-money call and buying an out-of-
the-money call. All options have the same expiration date and are on the
same underlying asset. Although similar to a butterfly spread, this strategy
differs because it uses both calls and puts, as opposed to one or the other.
PROTECTIVE COLLAR

• A protective collar strategy is performed by purchasing an out-of-the-

money put option and simultaneously writing an out-of-the-money call
option for the same underlying asset and expiration. This strategy is often
used by investors after a long position in a stock has experienced substantial
gains. This options combination allows investors to have downside protection
(long puts to lock in profits), while having the trade-off of potentially being
obligated to sell shares at a higher price (selling higher = more profit than at
current stock levels).