- Paperback: 262 pages
- Publisher: Wiley; 1 edition (January 16, 2001)
- Language: English
- ISBN-10: 0471498114
- ISBN-13: 978-0471498117
- Product Dimensions: 6.1 x 0.6 x 9 inches
- Shipping Weight: 1.1 pounds (View shipping rates and policies)
- Average Customer Review: 4.0 out of 5 stars See all reviews (53 customer reviews)
- Amazon Best Sellers Rank: #810,304 in Books (See Top 100 in Books)
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Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It 1st Edition
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Frequently Bought Together
"...a primer for those interested in the world of financial theory."
"Inventing Money is not the last word on the subject, but it is a good start."
"Dunbar tells the full story of this most public of financial disasters, unveiling previously undisclosed information, in captivating and accessible terms."
"Mr Dunbar has gained the rare distinction of writing an interesting and informative book on a very complex financial subject and for that he deserves much credit."
--Offshore Financial Review
"Dunbar offers us a well-written and informative account of how the company's culture developed, and why LTCM plummeted so dramatically."
"It is a fast moving and readable account that explains the development of finance over the centuries before recounting the brief but eventful life of LTCM."
"A fascinating tale, not to be missed."
"...his brave effort to explore the LTCM fiasco, its origins, and its ramifications. Dunbar is a former academician and journalist, making him an ideal writer to explore the theoretical origins of LTCM.
The author excels with his affectionate portrait of financial-theory giants such as the late Fischer Black. This book is a good source of information on the theoretical underpinnings of modern arbitrage."
"Nicholas Dunbar has written a fascinating account of this spectacular episode, and in doing so has provided an instructive insight into the functioning of global capitalism."
"Nicholas Dunbar's fascinating book is well-written. The book should appeal to a wide audience. Economists should certainly read it. Dunbar writes in a clear and accessible manner."
From the Inside Flap
In the story of Long-Term Capital Management the facts speak for themselves.
* December 1992, former Salomon Brothers' Vice-Chairman John Meriwether teams up with two Nobel laureates - Myron Scholes and Robert Merton - together with his team of huge-earning arbitrage traders to found LTCM
* in both 1995 and 1996 LTCM returns net profits of over 40%
* in November 1997 LTCM hands back US$2.7 billion "excess capital" to investors
* in early 1998 LTCM increased its portfolio of assets to US$130 billion and commanded a derivatives portfolio with a notional value of US$1.25 trillion
* in August/September 1998 the total value of assets on the world's markets declines by US$3 trillion
* by September 1998 LTCM loses 90% of its value and has to be bailed out to the tune of US$3.6 billion
* from September 1998 to the present day, the ripples of this collapse continue to be felt across the globe
But try to look behind these bald facts, and the picture becomes shrouded in mystery. The diverse nature of LTCM's trading, which only allowed insiders to know the full picture, has confused many onlookers seeking to piece together the puzzle. It has been described as the equivalent to three blind men standing by an elephant: the first grabs the tail and thinks it's a snake, the second leans against it and thinks it's a wall and the third reaches out to the trunk and believes it to be a branch. In Inventing Money Nicholas Dunbar strips away the shroud of mystery and complexity to tell the complete story of this most public of financial disasters in a captivating and accessible style. Inventing Money is in equal measure the story of the strategy and people behind the collapse of one of the world's largest hedge funds, an explanation of how the modern world of finance functions and a walk through the historical development of this multi-billion dollar industry.
Top Customer Reviews
A bit more technical than "When Genius Failed," this book gives the reader lots of background material on the theory behind what Long-Term was supposed to do: namely, arbitrage. As a Ph.D. student of financial economics, I found Dunbar's explanations easy to understand, but I can also see that they will be quite obfuscating to non-specialists in this area. The second part, about Long-Term's dealings, is easier to understand for everyone. While his account of what transpired to Long-Term is not as vivid as Lowenstein's, I think Dunbar does a laudable job at keeping the story flowing. BTW, the paperback addition has a thoroughly updated last chapter, "Aftermath."
If you are interested in the Long-Term story, both books are worth keeping. If you have to choose, go with "Inventing Money" if you are also interested in the history of finance theory and financial engineering; if you prefer an "insider's view," "When Genius Failed" would be a better choice.
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. Great going!
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 unpenetrable graphs, equations and formulae to show just how clever he and the LTCM sort of person is.
Still, while the casual observer of the Stock Market (you know, the sort who watches the news each night to see if it went up or down) might find little in this book to light their candle, those in the industry and short on specific knowledge, or with aspirations of getting into it, could hardly find a better place to start.
The book blends an historical perspective of the developments in financial markets over the past 25 years that led to the opportunities as well as the risks presented to the partners of Long Term Capital with a well-researched account of the fund's operations and ultimate demise. Properly researching the rise and fall of LTCM could only have been a daunting task. In its heyday details of the funds operation were kept mainly private and could only have become more so as the proverbial sh-t hit the proverbial f-n.Read more ›
Most Recent Customer Reviews
Decent job of explaining things. A number of errors ("Basel" is spelled "Basle" repeatedly, and the descriptions of delta hedging and asset swaps need work) but... Read morePublished 6 months ago by Vernice Fresca
Inventing Money tells the story of the rise and fall of Long Term Capital Management and its main characters. Read morePublished 8 months ago by Henrik Warne
Inventing Money illustrates the dangers of using financial models. It focuses on the demise of Long-Term Capital Management (LTCM) - a hedge fund which imploded in 1998. Read morePublished 14 months ago by David Lindsay
as an equity guy, this book was a headache to read initially as i skipped out of hardcore options course at columbia b-school and i had no patience for options & black scholes... Read morePublished on August 18, 2014 by NiQ
I work in this industry as a lawyer, and I know just enough about derivatives pricing, CAPM and VAR to be dangerous. Read morePublished on January 13, 2014 by DJM
This has nothing to do with the mechanics or valuation of money. The title apparently refers to the algorithms that the LTCM principles used to earn a lot of money while it worked. Read morePublished on February 4, 2013 by Gderf
The more I read about LTCM my curiosity for knowing more about the debacle surface. After reading Inventing Money I came to know so many new things which I was not able to know... Read morePublished on March 27, 2012 by AJIT SINGH
This is a fantastic book. It's primary strength is introducing financial concepts & instruments that the lay man can understand. Read morePublished on December 15, 2011 by SilverMalthusian