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Short-term funds, with higher interest rates, fund the costs of the current cycle, and “long-term funds are utilized only to finance fixed assets and a part of the permanent working capital.” As eFinance Management points out, this strategy “saves the interest cost at the cost of high risk.”

J. Butler, E. Lee, C. Prevalsky, J. Zhao LTCM1 Proposal v. 4 2 Background John Meriwether and other founding principals Before diving into the set of events that contribute to the rise and fall of Long‐Term Capital Management,

Long-Term Capital Management, L.P. (LTCM) was in the business of engaging in trading strategies to exploit market pricing discrepancies. Because the firm employed strategies designed to make money over long horizons--from six months to two years or more--it adopted a long--term financing structure designed to allow it to withstand short-term market fluctuations.

Long-Term Capital Partners was founded in 1993 by John Meriwether, who previously worked as the head of fixed income trading at Salomon Brothers. Even after being forced to leave Salomon in 1991 due to the firm’s treasury auction rigging scandal (another marker buoy), Meriwether maintained huge loyalty from a team of highly respected relative ...