Case Studies

Products explain what an instrument is; concepts explain how it works. These 19 pages explain what happened when it went wrong — mechanically, without moralising, because the mechanisms repeat. Each case links back into the products and concepts it used. Education only, as everywhere here — see the disclaimer.

The badges say how much a page assumes: Start here nothing beyond plain English · Some background helps one concept from elsewhere on the site · Assumes the mechanics written for someone already inside the market.

The library

• LTCM, 1998Some background helpsconvergence trades at thirty times leverage, and the discovery that dozens of "independent" positions were one bet on liquidity.
• Subprime & the CDO Machine, 2008Some background helpshow a single national bet on house prices was tranched, relabelled AAA and multiplied synthetically.
• The UK LDI Crisis, 2022Assumes the mechanicspension funds hedged correctly and still nearly failed, because variation margin is due the same day.
• Archegos, 2021Some background helpsone family office, five prime brokers, and leverage that was invisible because it was fragmented.
• Volmageddon, 2018Some background helpsshort-volatility products that had to buy volatility precisely as it spiked.
• Negative Oil, April 2020Some background helpsa physical delivery constraint priced through zero in one afternoon.
• The Swiss Franc Floor, 2015Start herethree years of suppressed volatility resolved in thirty per cent and a few minutes.
• FTX, 2022Start herenot a market accident: custody that wasn't custody, and the run that revealed it.
• Barings, 1995Start hereone trader running both his own desk and the office that checked it, and a 233-year-old bank sold for £1.
• Metallgesellschaft, 1993Some background helpsa hedge that was economically sound and financially fatal, because only one leg paid cash daily.
• Amaranth, 2006Some background helps$6.6bn on natural gas spreads, lost not to a wrong view but to owning half the market.
• The AT1 Write-Down, 2023Some background helps$17bn of bank capital to zero while shareholders below it received stock. The hierarchy was a document all along.
• The Short Squeeze, 2021Start herea crowded short, a coordinated crowd, and the week clearing margin became the story.
• Black Monday, 1987Start herethe largest one-day fall in modern history with no news to explain it. Insurance that turned out to be a synchronised sell order.
• The Asian Crisis, 1997Start herecurrency pegs, borrowing in a currency you do not earn, and the template every emerging-market crisis has followed since.
• The Dot-Com Bust, 2000Start herethe technology prediction was correct and the prices were not. Why being right about the future is not being right about the price.
• Wirecard, 2020Start here€1.9bn of cash that never existed, inside a blue-chip index, audited for years. What index membership certifies, which is nothing.
• The Nickel Squeeze, 2022Some background helpsa producer hedge became the squeezed short, and the exchange cancelled the trades. What a cancelled market does to the meaning of a price.
• Silicon Valley Bank, 2023Start herea bank that took no credit risk and failed in two days. Held-to-maturity accounting, a concentrated depositor base, and a run at the speed of a group chat.

What they have in common

• Leverage sets the clock. In LTCM, LDI and Archegos, the trades were defensible; the funding schedule was not.
• Correlation is a peacetime measurement. Every case where "diversified" positions failed together had one hidden common factor — liquidity, house prices, or a margin call.
• Mechanics beat opinions at the deadline. Expiry dates, rebalancing rules and margin schedules decided the outcome in 2018, 2020 and 2022 — all published in advance.
• Suppressed volatility is stored volatility. The calm before 2015 and 2018 was the position, not the environment.
• Controls decay as success grows. Barings and Amaranth both handed more capital and less scrutiny to whoever had made the most money last year.
• The legal claim outranks the economic story. FTX and the 2023 AT1 write-down both ended on what the documents said, not on what holders believed they owned.
• Nobody in these stories was doing anything unusual — which is exactly why the mechanisms are worth knowing.