Skip to content
FREE SHIPPING ON ALL DOMESTIC ORDERS $35+
FREE SHIPPING ON ALL US ORDERS $35+
The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . an - Hardcover | Diverse Reads

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . an

Availability:
in stock, ready to be shipped
Save 11% Save 11%
$27.95
$27.95 - $27.95
$27.95
$24.99
$24.99 - $24.99
$24.99
A compelling narrative on what went wrong with our financial system—and who’s to blame.

From an award-winning journalist who has been covering the industry for more than a decade, The Devil’s Derivatives charts the untold story of modern financial innovation—how investment banks invented new financial products, how investors across the world were wooed into buying them, how regulators were seduced by the political rewards of easy credit, and how speculators made a killing from the near-meltdown of the financial system.

Author Nicholas Dunbar demystifies the revolution that briefly gave finance the same intellectual respectability as theoretical physics. He explains how bankers worldwide created a secret trillion-dollar machine that delivered cheap mortgages to the masses and riches beyond dreams to the financial innovators.

Fundamental to this saga is how “the people who hated to lose” were persuaded to accept risk by “the people who loved to win.” Why did people come to trust and respect arcane financial tools? Who were the bankers competing to assemble the basic components into increasingly intricate machines? How did this process achieve its own unstoppable momentum—ending in collapse, bailouts, and a public outcry against the giants of finance?

Provocative and intriguing, The Devil’s Derivatives sheds much-needed light on the forces that fueled the most brutal economic downturn since the Great Depression.

ISBN-13: 9781422177815

Media Type: Hardcover

Publisher: Harvard Business Review Press

Publication Date: 07-12-2011

Pages: 320

Product Dimensions: 6.40(w) x 9.30(h) x 1.20(d)

Nicholas Dunbar is one of the most respected financial journalists in the United Kingdom, covering complex derivatives and risk management. He is the author of Inventing Money: The Story of Long-Term Capital Management and a columnist for Reuters. In 2007, he won the State Street award for institutional financial journalism.

Read an Excerpt

The Devil's Derivatives

The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . an

By Nicholas Dunbar

Harvard Business Review Press

Copyright © 2011 Nicholas Dunbar
All rights reserved.
ISBN: 978-1-4221-7781-5

Excerpt


(Continues...)
Excerpted from The Devil's Derivatives by Nicholas Dunbar. Copyright © 2011 by Nicholas Dunbar. Excerpted by permission of Harvard Business Review Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
<

Table of Contents

Foreword ix

Introduction: The Siren Song of the Men Who Love to Win x

Part 1 The Bets That Made Banking Sexy 1

Introduction to derivatives

Long-term actuarial approach versus the market approach to credit

Goldman Sachs sees opportunity in default swaps

The market approach vindicated by Enron's bankruptcy

Part 2 Going to the Mattresses 27

The advent of VAR and OTC derivatives

The collapse of Long-Term Capital Management (LTCM)

A fatal flaw is exposed

The wrong lesson is learned

Part 3 A Free Lunch … with Processed Food 55

A new market for collaterized debt obligations (CDOs)

Risky investments, diversification, and the role of the ratings agencies

Barclays finds investors for its CDOs, only to fall out with them

Part 4 The Broken Heart Syndrome 85

J.R Morgan and Deutsche Bank dominate the European CDO market

Innovation outpaces the ratings agencies

Traders make millions with the help of correlation models

Reasons for concern

Part 5 Regulatory Capture 115

The Fed lessens the restraints on big banks

Regulators are unable to keep pace

Banks abuse the system

Government agencies miss the chance to rein in the abuses

Part 6 Burning Down the Housing Market 143

A boom in the demand for CDOs

Subprime bonds and a new kind of default swap help feed the demand

Housing bubble begins to burst

Dealers bet against their own deals

Part 7 The Eyes of Satan 177

The secret history of shadow banking

Cash gets subverted by subprime

Ratings agencies jump on the structured investment vehicle (SIV) bandwagon

Skittish investors flee the market

Part 8 Massive Collateral Damage 207

A flood of toxic assets undermines confidence in the market-based system

Goldman Sachs takes advantage

Investors bet on the collapse of the banks

Disaster is imminent

Governments prop up the system

Epilogue 239

Appendix 251

Notes 257

Index 269

Acknowledgments 287

About the Author 291