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

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9780470393758: A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
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Inside markets, innovation, and risk

Why do markets keep crashing and why are financial crisesgreater than ever before? As the risk manager to some of theleading firms on Wall Street–from Morgan Stanley to Salomonand Citigroup–and a member of some of the world’slargest hedge funds, from Moore Capital to Ziff Brothers andFrontPoint Partners, Rick Bookstaber has seen the ghost inside themachine and vividly shows us a world that is even riskier than wethink. The very things done to make markets safer, have, in fact,created a world that is far more dangerous. From the 1987 crash toCitigroup closing the Salomon Arb unit, from staggering losses atUBS to the demise of Long-Term Capital Management, Bookstaber givesreaders a front row seat to the management decisions made by someof the most powerful financial figures in the world that led tocatastrophe, and describes the impact of his own activities onmarkets and market crashes. Much of the innovation of the last 30years has wreaked havoc on the markets and cost trillions ofdollars. A Demon of Our Own Design tells the story ofman’s attempt to manage market risk and what it has wrought.In the process of showing what we have done, Bookstaber shines alight on what the future holds for a world where capital and powerhave moved from Wall Street institutions to elite and highlyleveraged hedge funds.

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From the Inside Flap:

It's Wall Street's most painful paradox. Investors are more sophisticated than ever, are enabled by unprecedented technology, and protected by more government oversight and regulation than at any other time in history. Yet Wall Street is becoming a riskier and riskier place. Crashes and catastrophic losses seem commonplace. Hedge funds wreck on the financial shoals with a disturbingly familiar pattern. Worse, today's financial crises do not arise from economic instability or acts of nature, but from the very design of the financial markets themselves.

In A Demon of Our Own Design, Richard Bookstaber paints a vivid picture of a financial world that is ever edging toward disaster. As a hedge fund 'rocket scientist,' Bookstaber provides an insider's perspective to the tumultuous management decisions made by some of the world's most powerful financial figures from Warren Buffett to Sandy Weill to John Meriwether,as well as recounting his own contribution to market calamities. He designed some of the complex options and derivatives that, combined with the globalization of the world's markets and the ever-increasing speed of transactions, allow markets to slide out of control. And he explains why the best efforts of institutions on the front lines to create safeguards, manage risk, and regulate the markets may end up contributing to instability. Bookstaber argues that many of the financial innovations and regulations that are supposed to level the playing field instead make the markets more dangerous for all the players, big and small.

Drawing on his intimate knowledge of such infamous disasters as the 1987 Crash and the demise of Long-Term Capital Management, Bookstaber identifies the key areas that make markets vulnerable: liquidity that begets greater leverage; innovation that creates greater complexity; and a structure that demands a nonhuman level of rationality. The twofold solution he suggests—reducing complexity and breaking the tight coupling of transactions—goes against the prevailing winds of Wall Street, but will lead to a more robust and survivable market.

From the Back Cover:

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 acockroach, you are assured of a controversial, illuminating, andfascinating discovery of where the financial risks really lurk andhow to avoid them. Bookstaber knows whereof he speaks."
—Peter L. Bernstein, author of Against the Gods: TheRemarkable Story of Risk

"Are you ready for the real deal? An insider, everysider view ofthe Wall Street calamities that have kept investing tantalizinglyhot and frighteningly volatile since the crash of '87. For anin-depth, curtains-open, and coolly written exposition of WallStreet, 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 tradingfloor."
—The Economist

"I cannot recommend this book too highly. It is a clearexposition of what the combination of derivatives, leverage, andhedge funds can do to the markets."
—Forbes.com

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9780471227274: A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation

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Book Description John Wiley and Sons Ltd, United Kingdom, 2008. Paperback. Condition: New. 1. Auflage. Language: English. Brand new Book. Inside markets, innovation, and risk Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street-from Morgan Stanley to Salomon and Citigroup-and a member of some of the world's largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of man's attempt to manage market risk and what it has wrought.In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds. Seller Inventory # AAH9780470393758

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Book Description Wiley. Paperback. Condition: New. 304 pages. Dimensions: 8.9in. x 5.9in. x 0.9in.Inside markets, innovation, and riskWhy do markets keep crashing and why are financial crises greater than ever before As the risk manager to some of the leading firms on Wall Streetfrom Morgan Stanley to Salomon and Citigroupand a member of some of the worlds largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of mans attempt to manage market risk and what it has wrought. In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds. This item ships from multiple locations. Your book may arrive from Roseburg,OR, La Vergne,TN. Paperback. Seller Inventory # 9780470393758

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Book Description John Wiley and Sons Ltd, United Kingdom, 2008. Paperback. Condition: New. 1. Auflage. Language: English. Brand new Book. Inside markets, innovation, and risk Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street-from Morgan Stanley to Salomon and Citigroup-and a member of some of the world's largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars. A Demon of Our Own Design tells the story of man's attempt to manage market risk and what it has wrought.In the process of showing what we have done, Bookstaber shines a light on what the future holds for a world where capital and power have moved from Wall Street institutions to elite and highly leveraged hedge funds. Seller Inventory # LIE9780470393758

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