Long-Term Capital Management

LTCM's 1998 collapse—requiring Fed-coordinated rescue by 14 banks—demonstrates how leverage combined with crowded trades creates systemic risk. The hedge fund with two Nobel laureates used 25:1 leverage on convergence trades that every quant was making. When Russia defaulted and trades reversed, LTCM's losses threatened every bank that had copied its strategies. Like a species whose behavior triggers ecosystem cascade, LTCM's death would have killed its imitators.