Trillion dollar bet: Summary

Introduction

This is a finance oriented movie original broadcast on the PBS TV channel in the year 2000, describes the events that led to the creation of a hedge fund known as Long Term Capital Management, it rise and eventual collapse. The movie basically describes that stock markets are founded on irrational emotions such that buyer and sellers in these markets are heavily influenced by their own psychological perceptions. This paper presents a summary of the movie Trillion Dollar Bet.

Summary

Three gifted and talented economists namely Black, Fischer;  Scholes, Myron and Merton, Robert;, made a startling discovery in 1973 considered as a phenomenal mathematical Holy Grail which served to revolutionize the modern world’s view on financial management. Through the phenomenal mathematical formula, which was not only simple but also sparse, the trio was able to create an industry worth trillions of dollars. Their ideas ensured that Scholes and Merton won the prestigious Nobel Prize though unfortunately for Black, death had robbed him of a crown for his achievements.

Merton and Scholes in 1993 went on to team up with a renowned bond trader from Salomon Brothers and later partnered with 13 individuals to establish an organization known as Long Term Capital Management which was in essence a hedge fund. This company promised investors supernormal returns on investment through the application of the Holy Grail likened mathematical formula by Merton and Scholes. At first, the company made true their word to investors but later on, the phenomenal formula shuttered under the dynamics of the real-time market determinants threatening the existence of global markets.

Conclusion

The psychology of the stock markets crashed the mathematical formula formulated by Merton and Scholes and used to reap trillions of dollars in profits. This movie vividly shows how egos of the two economists were brought down to earth as LTCM collapsed before them. The movie underscores that no individual or group of persons have the capability to influence financial markets to their advantage.