Episode Details

Two Nobel Prize winners. One hundred and twenty-five billion dollars in exposure. The Federal Reserve forced to intervene. LTCM's models predicted every scenario except the one where every counterparty moves simultaneously. This is the analysis of distributed prime brokerage leverage — how nine banks each thought they had a manageable exposure, and none of them knew they were all financing the same concentrated position.

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What a GP or LP should have seen in the LPA before the margin call arrived.Three red flags were in the public record before LTCM collapsed. The leverage was visible. The correlation assumption was documented. The counterparty concentration was in the prime brokerage disclosures. This episode dissects the LTCM prime brokerage leverage architecture, the tail correlation breakdown mechanism, and the three institutional due diligence failures that allowed $1.25 trillion in notional exposure to accumulate across fourteen prime brokers simultaneously. GP/LP analysis. Hedge fund due diligence. Systematic risk framework. Financial Forensics Labs — GP/LP Analysis. Every collapse has a pattern. We dissect it. Layer by layer.