A Demon of Our Own Design · Markets, Hedge Funds, and the Perils of Financial Innovation by Bookstaber, Richard -- Read -- Imperial Library of Trantor

Index

Contents Title Copyright Dedication Preface Acknowledgments About the Author Chapter 1: Introduction: The Paradox of Market Risk Chapter 2: The Demons of ’87

Crunch Time at Morgan Stanley The Formula My Life as an Insurance Salesman Running for the Lifeboat Read the Fine Print Risk Arbitrage: The Snowball at the Mountaintop Ignoring the Cassandras A Long Weekend The Avalanche Buries the Buyers Collateral Damage Bad Gamma The Physics of the Meltdown We can see the Future of Markets, And it’s Ugly

Chapter 3: A New Sheriff in Town

Searching for Land Mines with their Feet The APL Cult Out of the Loop

Chapter 4: How Salomon Rolled the Dice and Lost

The Roof Caves in on Mortgages Thirty Million Over Tokyo Shotgun Marriage A Lesson in Self-Delusion Jack Jumps in The Problem with Stocks Into the Arms of Travelers

Chapter 5: They Bought Salomon, then They Killed it

The Arbs Lose Face Good-Bye to Quant Heaven Circling Vultures The July Fourth Massacre Rothschild and Waterloo Fooling Just About Nobody Leverage and the Roots of Crises How to Prevent a Liquidity Crisis

Chapter 6: Long-Term Capital Management Rides the Leverage Cycle to Hell

Risky Business The Deceptive Charms of Relative Value Haghani Steps off the Cliff The Competition Sticks the Knife in What were they Thinking? Mirror, Mirror, on the Fall Lousy with Leverage The Japanese take UBS to the Cleaners Ramy Goldstein takes UBS to the Cleaners LTCM takes UBS to the Cleaners Salomon Smith Barney Loses its Nerve

Chapter 7: Colossus

Sandy Steps in it with Both Feet Standing Tall Kindergarten Confidential The Consequences of Colossus The Numbers are the Issue Pacioli Runs the Numbers Da Vinci’s Accountant is Still Keeping Our Books My Departure from Citigroup

Chapter 8: Complexity, Tight Coupling, and Normal Accidents

The Ties that Bind The Regulation Trap Accidents Waiting to Happen: Interactive Complexity and Tight Coupling Tight Coupling and Interactive Complexity: An X-Rated Behavior Normal Accidents and Organizations You can’t Play it Safe

Chapter 9: The Brave New World of Hedge Funds

Fun with Data Bubble Baths Why Tulip Mania wasn’t Crazy Futures Shock, 1635 “This Crap is Going to be Worth Zero” Pairing Off: The Emergence of Statistical Arbitrage Arrivederci Tartaglia Long-Term Capital Management’s Scandalous Birth The March of the Long/Short Hedge Funds

Chapter 10: Cockroaches and Hedge Funds

Imperfections in the Perfect Paradigm It’s the Liquidity, Stupid Liquidity in Three Easy Lessons Too much Information Primal Risk and the Limits of Knowledge Cockroaches and the Benefits of Coarse Behavior Fate Finishes the Furu Primal Risk and the Case for Coarse Humans Our Not-so-Efficient Reality The Danger to the System is the System

Chapter 11: Hedge Fund Existential

Can We Regulate Hedge Funds? The Half-Life of Hedge Funds Will Hedge Funds take Over the Investment World? Do You Believe?

Conclusion Index