[dkural]

The Ito calculus being applicable for solving Black-Scholes might be a better example for the original question :)

I am not sure it's better if that was not invented - the question of option pricing doesn't go away, it's a fundamental need for real businesses producing commodities that need to hedge real risk around the weather, or selling into cyclical industries etc.

LTCM (& it's failure) has as much to do with getting so big as to present a systemic risk to the entire financial sector, and over-leverage. No matter what formula they use to price their options, those two factors make for a dangerous combination. There is a perverse incentive to become "too big to fail", because if you truly reach that, the gains stay private whereas the losses are inevitably socialized to prevent taking down the whole system.