Summary of A Demon of Our Own Design

Markets, Hedge Funds, and the Risks of Financial Innovation

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A Demon of Our Own Design book summary
An examination of financial risk: what Wall Street should do about the pitfalls of the newest investment mechanisms.


7 Overall

6 Applicability

8 Innovation

6 Style


This book is part memoir, part reflection on risk, part tell-all, part recapitulation of recent financial crises and part polemic. If you fret that all these parts might blur author Richard Bookstaber’s objectives and message, you are right, but, if you have the patience, keep reading. Enjoy the somewhat diffuse anecdotes and observations in the first few chapters until you reach the author’s straightforward presentation of his case that the U.S. financial system is at risk from complexity and tight coupling. The book would have benefited from a slightly fresher take on the financial crises of the last three decades. However, given the author’s years as a risk manager on Wall Street (Morgan Stanley, Salomon Brothers, Citigroup) and as a hedge fund expert (Moore Capital, Ziff Brothers, FrontPoint), his personal experience during fiscal crises and his close view of dramatic turns in the market, getAbstract finds that his diagnosis of systemic problems conveys several important stories and that his analysis deserves your attention.

In this summary, you will learn

  • What is the history of recent Wall Street financial crises
  • How innovative financial instruments have created dangerous complexity and tight coupling
  • What creates systemic fiscal risk and instability, and how to address it


Portfolio Insurance and the Crash of 1987
Ed Thorp, a mathematician from MIT, pioneered analytical trading. In 1966, he wrote his first book, Beat the Dealer, which explained how to win at blackjack. He followed that with Beat the Market, a book about winning on the stock...
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About the Author

Richard Bookstaber runs an equity hedge fund in Greenwich, Connecticut. He was director of risk management at two major investment firms. He is the author of three books and scores of articles on finance topics.

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