High levels of leverage, however, did not necessarily imply huge risk (as much subsequent commentary suggested). For example, the risks of swapspread trades are rather limited. Bond prices and the terms on which swaps are offered fluctuate considerably, particularly as interest rates vary. LTCM, however, almost always neutralized that risk by constructing "two-legged" trades, in which the effects on one "leg" of a change in interest rates would be canceled by its equal-but-opposite effect on the other "leg." (The trade in appendix G is an example.) The chief "market risk" of swap-spread trading is of the spread temporarily moving in an unfavorable direction, but if that happens the arbitrageur can simply continue to hold the position and wait until liquidating it becomes profitable.

Donald MacKenzie, An Engine, Not a Camera, loc. 982