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

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CONTENTS

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 ...

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