Trading blow-ups are rarely caused by a bad idea. More often a good idea is held too large, with borrowed money, in the same positions as everyone else, in an instrument that cannot be sold when it matters. Some cases in brief:
What the study covers
- 1Overview: survival is the factor that goes to zero
- 2The common pattern: the liquidity spiral
- 3Timeline of blow-ups and crashes, 1987–2025
- 4Black Monday and portfolio insurance (1987)
- 5LTCM (1998)
- 6Amaranth (2006)
- 7The quant quake (August 2007)
- 8
- 9The Flash Crash (6 May 2010)
- 10The Swiss franc (15 Jan 2015)
- 11Volmageddon, LJM and Optionsellers.com (2018)
- 12March 2020
- 13GameStop, Melvin and Archegos (2021)
- 14Europe: LME nickel and UK pension funds (2022)
- 15The yen-carry unwind (5 Aug 2024)
- 16The tariff crash (April 2025)
- 17Who paid
- 18Warning signs in a trading book
- 19How to read stress-test and "risk-managed" claims
- 20Key numbers
- 21Landmark firms and cases
- 22Pitfalls
- 23How an expert thinks about it
- 24Glossary
Technical exhibits
Worked examples, checklists and case studies included with this study.
Ltcm and Volmageddon Xiv Case Studies
Two case studies scored against the edge equation. LTCM (1994–2000): the convergence trades, the leverage, the August–September 1998 losses by trade type, the Fed-convened rescue, and what the models missed. Volmageddon (2010–18): how inverse-VIX notes worked, the daily rebalancing that made them buy volatility into a spike, 5 Feb 2018, the termination of XIV, the changes to SVXY, and LJM Partners
Companies in this study
- Long-Term Capital Management
- Salomon Brothers Arbitrage Group
- Amaranth Advisors
- AQR Capital Management
- Citadel LLC
- Knight Capital
- XIV and Volmageddon
- LJM Partners
- Optionsellers.com
- Malachite Capital
- Infinity Q Capital
- Melvin Capital
- Archegos Capital
- Interactive Brokers
- Robinhood
- FXCM and the Franc Shock
- Saxo Bank
- Universa Investments
- Berkshire Hathaway Derivatives
- Metallgesellschaft
- Three Arrows Capital
- Cboe Global Markets
- Options Clearing Corporation. In other knowledge bases: Finance: sections for the banks' side of 2008 and Archegos; Energy: sections for oil markets and negative WTI.