A Demon of Our Own Design. Markets, Hedge Funds, and the Perils of Financial Innovation

  • ID: 2325464
  • Book
  • 304 Pages
  • John Wiley and Sons Ltd
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Named a top business book of the year by the Financial Times, Kiplinger′s Personal Finance, and Library Journal

Praise for A Demon of Our Own Design

"This book is powerful stuff. When the hero of the story is a cockroach, you are assured of a controversial, illuminating, and fascinating discovery of where the financial risks really lurk and how to avoid them. Bookstaber knows whereof he speaks."
—Peter L. Bernstein, author of Against the Gods: The Remarkable Story of Risk

"Are you ready for the real deal? An insider, everysider view of the Wall Street calamities that have kept investing tantalizingly hot and frighteningly volatile since the crash of ′87. For an in–depth, curtains–open, and coolly written exposition of Wall Street, Bookstaber is my man."
—Mark Rubinstein

Professor of Finance, UC Berkeley

"He understands the inner workings of the financial markets. . . . A liberal sparkling of juicy stories from the trading floor."
—The Economist

"I cannot recommend this book too highly. It is a clear exposition of what the combination of derivatives, leverage, and hedge funds can do to the markets."

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Preface ix

Acknowledgments xvii

About the Author xix

CHAPTER 1 ∼ Introduction: The Paradox of Market Risk 1

CHAPTER 2 ∼ The Demons of ’87 7

CHAPTER 3 ∼ A New Sheriff in Town 33

CHAPTER 4 ∼ How Salomon Rolled the Dice and Lost 51

CHAPTER 5 ∼ They Bought Salomon, Then They Killed It 77

CHAPTER 6 ∼ Long–Term Capital Management Rides the Leverage Cycle to Hell 97

CHAPTER 7 ∼ Colossus 125

CHAPTER 8 ∼ Complexity, Tight Coupling, and Normal Accidents 143

CHAPTER 9 ∼ The Brave New World of Hedge Funds 165

CHAPTER 10 ∼ Cockroaches and Hedge Funds 207

CHAPTER 11 ∼ Hedge Fund Existential 243

Conclusion: Built to Crash? 255

Notes 261

Index 273

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Richard Bookstaber
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