We’ve all heard the lectures. Leverage caused the GFC. Leverage blew up Long-Term Capital Management in ’98. Leverage cratered Amaranth on a bad natural gas trade in ’06. The word itself carries decades of scar tissue, and for good reason. Pile enough of it onto a concentrated bet and you don’t just lose. You take a few counterparties down with you.
So here’s the honest question. If leverage is the villain in every cautionary tale, why have institutions been quietly using it for forty years to m...
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