Summary of Inventing Money

The Story of Long-Term Capital Management and the Legends Behind It

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Inventing Money book summary
The bigger (and more brilliant, sophisticated and arrogant) they are, the harder they fall.

Rating

7 Overall

5 Applicability

8 Innovation

8 Style

Recommendation

Author Nicholas Dunbar captures both the personalities and complex financial theories that built Long-Term Capital Management, the hedge fund that threatened to bring down world markets in its spectacular 1998 collapse. His explanation of arcane markets will be understandable to the lay reader, although the details may be hard to follow if you don’t have a solid grounding in statistics, math or economics. Our one wish would be for more attention to the aftermath and the unprecedented bail-out orchestrated by U.S. financial regulators. But even in light of this shortcoming,getAbstract recommends this fascinating real-life market saga to general and business readers, and to anyone who ever comes anywhere near the financial markets.

In this summary, you will learn

  • How the creation of new financial instruments, theories and technology spawned new investment opportunities in the 1970s, 80s and 90s
  • How a group of bond traders and mathematicians raised billions of dollars for the Long-Term Capital Management hedge fund
  • How this hedge fund used leverage and sophisticated computer modeling to generate unprecedented investment returns
  • How these models failed in a collapse that threatened world financial markets
 

Summary

The Rise and Fall of LTCM
Former Salomon Brothers Vice Chairman John Meriwether formed Long-Term Capital Management with Myron Scholes and Robert Merton - two Nobel Laureates who won their prize for their theory of option pricing - and a team of arbitrage traders. It returned fantastic...
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About the Author

Nicholas Dunbar studied physics in the United Kingdom at Manchester and Cambridge and in the U.S. at Harvard University, where he received a Master’s in earth and planetary sciences. After he left academia in 1990, he worked in feature films and television, and launched Flicker Films, a television production company. In 1996, he turned to finance and science writing, focusing on the derivatives industry. In 1998, he joined Risk magazine as its technical editor. He lives in London.


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