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Inventing Money: Difference between revisions
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I was prompted into buying this book after seeing a truly hopeless Channel 4 documentary about the [[LTCM]] collapse which attempted — but failed entirely — to explain what LTCM was all about: What the [[Black-Scholes option pricing model]] did, how Meriwether and cohorts used it to make money, and how they managed to singlehandedly bring western world as we know it to the brink of financial collapse with a formula which is supposed to completely eliminate risk. | I was prompted into buying this book after seeing a truly hopeless Channel 4 documentary about the [[LTCM]] collapse which attempted — but failed entirely — to explain what LTCM was all about: What the [[Black-Scholes option pricing model]] did, how Meriwether and cohorts used it to make money, and how they managed to singlehandedly bring western world as we know it to the brink of financial collapse with a formula which is supposed to completely eliminate risk. | ||
Dunbar's very readable book scores on two fronts: firstly, it succeeds in explaining how these putatively | Dunbar's very readable book scores on two fronts: firstly, it succeeds in explaining how these putatively “risk free" trades manage to make profit and be (to 'all' intents and purposes) perfectly hedged, when conventional wisdom would suggest that a perfectly hedged position must by definition be 'flat', and secondly, it serves as an excellent primer for anyone wanting to understand how the debt markets in general, and credit derivatives in particular, work. And all this in a little over 200 pages. | ||
The subject matter isn’t easy, but nor (at the level to which Dunbar takes it) is it rocket science, and to his immense credit Dunbar manages to resist the temptation to write it off as 'baffling rocket science by Harvard Graduates which is far too hard for the stupid reader to understand' (which is what said Channel 4 documentary did) or to insert impenetrable graphs, equations and formulae to show just how clever he and the LTCM sort of person is. | The subject matter isn’t easy, but nor (at the level to which Dunbar takes it) is it rocket science, and to his immense credit Dunbar manages to resist the temptation to write it off as 'baffling rocket science by Harvard Graduates which is far too hard for the stupid reader to understand' (which is what said Channel 4 documentary did) or to insert impenetrable graphs, equations and formulae to show just how clever he and the LTCM sort of person is. | ||