Critical Discussion of the Predatory-Trading-Theory from Brunnermeier/Pedersen

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The paper explores the concept of predatory trading and its role in the collapse of Long-Term Capital Management (LTCM) in 1998. It addresses the mechanisms behind predatory trading, its consequences, and potential preventive measures. The analysis includes a theoretical framework for understanding predatory trading dynamics, followed by an examination of its advantages and disadvantages. Through this exploration, the paper aims to provide insights into the behavior of market participants during crises and the implications for financial stability.