Euromoney, is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Explosive theories: Inventing money: the story of LTCM and the legends behind it

Bad vibes in Bishopsgate

Climbing Steadily From Behind

The war of Wong's web

Stiglitz for the IMF

As one door closes...

More than a year after the event, with considerable hype, we have the story of Long-Term Capital Management put in the context of the history of financial engineering, in a new book published by John Wiley, Inventing money: the story of LTCM and the legends behind it, by Nicholas Dunbar. The best passage in the book is the introduction, which compares LTCM to Swift's flying island of Laputa: a country disappeared off the face of the earth - but it wasn't a real country, just a vast human construction, in its way a modern wonder of the world.

This nice conceit sets up the book, and for the serious student of financial engineering there's plenty about Fisher Black, Myron Scholes, Bob Merton, and how their science caused a devastating explosion.

Nick Dunbar concentrates on what Merton called the "productive interaction of financial theory and financial practice". These are academics involved in a cerebral war that nearly jeopardized the world financial system. There are nice explanations of financial models - the best being the image of a bluebottle tied to a piece of string.