When Genius Failed Test | Mid-Book Test - Medium

Roger Lowenstein
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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. What did the Black-Scholes model believe was constant?
(a) Growth.
(b) Meriwether's enthusiasm.
(c) Volatility.
(d) Income.

2. What type of government paper was bought in Italy?
(a) Fluctuating rate.
(b) Italian money.
(c) Deeds to monuments.
(d) Floating rate.

3. What is the CFTC short for?
(a) Commodities Finding True Commission.
(b) Commodities Futures Trading Commission.
(c) Counting Futures Trading Commodities.
(d) Capitalism Fortune Trust Commonwealth.

4. In order for Meriwether's Treasury futures investment to work, what did he need market prices to do?
(a) Fluctuate drastically.
(b) Converge.
(c) None of these.
(d) Remain the same.

5. What did Black and Scholes think price changes were?
(a) Dangerous.
(b) Common occurences.
(c) Random events.
(d) Smart corrections.

Short Answer Questions

1. In 1993, what was happening more than usual in America?

2. Who helped Meriwether raise money for Long-Term?

3. What was practically impossible to determine about Long-Term?

4. What was J.F. Eckstein & Co. primarily working on in 1979?

5. What did Meriwether do with his staff?

Short Essay Questions

1. Who was Jon Corzine?

2. How much of Long-Term did the Union Bank of Switzerland buy on a hedge?

3. What surprise happened when Meriwether was trading Treasury Bill futures?

4. Why did bonds lose their value in the 1970's?

5. When did huge losses begin for Long-Term and why?

6. Following the financial crisis in Russia, what did the partners do to begin raising money?

7. Following the crisis in Russia, what position did investors take that adversely affected Long-Term?

8. The financial models were unable to predict what key component of market behavior?

9. What methods did Black and Scholes use to predict the changes that would take place in the market?

10. When Meriwether was building his team at the Arbitrage Group, what qualities did he look for?

(see the answer keys)

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