When Genius Failed Test | Mid-Book Test - Hard

Roger Lowenstein
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This test consists of 5 short answer questions, 10 short essay questions, and 1 (of 3) essay topics.

Short Answer Questions

1. What did Long-Term do when IOs started to fall?

2. What did Long-Term want to do for investors?

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

4. What did the Black-Scholes model believe was constant?

5. What models did Long-Term follow?

Short Essay Questions

1. What was Meriwether's business model for Long-Term?

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

3. What was the Fed's response to Long-Term's exposure?

4. Who warned Long-Term about making trades that counted on falling stock prices?

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

6. In terms of the spreads in 1998, what was the difference between what Long-Term expected them to do and what they actually did?

7. What did the Black-Scholes model help Long-Term to predict?

8. What was the financial climate when Merton and Scholes were awarded the Nobel Prize?

9. How would a loan from a major bank help the partners at Long-Term make money?

10. What are relative value trades?

Essay Topics

Essay Topic 1

Write a brief essay supporting or refuting the following statement, citing examples from the text: The irresponsible management of Long-Term by the partners led to its downfall.

Essay Topic 2

Write a brief essay supporting or refuting the following statement, citing examples from the text: Long-Term took part in risky investments as the market became over-saturated.

Essay Topic 3

Meriwether began his career at Salomon Brothers before starting Long-Term. Write a detailed profile of his career path at Salomon Brothers, answering the following questions.

1) What risk did Meriwether take at Salomon Brothers?

2) What were the challenges and rewards?

3) Why did his career at Salomon Brothers come to an end?

(see the answer keys)

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