A Demon of Our Own Design. Markets, Hedge Funds, and the Perils of Financial Innovation
Expert Name
Richard Bookstaber, Ph.D.
July 28, 2007
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Why do markets keep crashing and why are financial crises greater than ever
before? As the risk manager to some of the leading firms on Wall
Street from Morgan Stanley to Salomon and Citigroup and a member of
some of the world's largest hedge funds, from Moore Capital to Ziff
Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost
inside the machine and vividly shows us a world that is even riskier
than we think. The very things done to make markets safer, have, in
fact, created a world that is far more dangerous. From the 1987 crash to
Citigroup closing the Salomon Arb unit, from staggering losses at UBS to
the demise of Long-Term Capital Management, Bookstaber gives readers a
front row seat to the management decisions made by some of the most
powerful financial figures in the world that led to catastrophe, and
describes the impact of his own activities on markets and market
crashes. Much of the innovation of the last 30 years has wreaked havoc
on the markets and cost trillions of dollars. A Demon of Our Own Design
tells the story of man's attempt to manage market risk and what it has
wrought. In the process of showing what we have done, Bookstaber shines
a light on what the future holds for a world where capital and power
have moved from Wall Street institutions to elite and highly leveraged hedge funds.
Richard Bookstaber, PhD (New York, NY) runs a hedge fund at FrontPoint Partners. Prior to this, he was Director of Risk Management at Moore Capital Management, one of the largest hedge funds in the world, and also served in that role at Ziff Brothers Investments. He served as Managing Director in charge of firm-wide risk management at Salomon Brothers and also served on that firm's powerful Risk Management Committee. Mr. Bookstaber spent 10 years at Morgan Stanley in quantitative research and as a proprietary trader, concluding his tenure there as Morgan Stanley's first market risk manager. He is the author of three books and scores of articles on finance topics ranging from options theory to risk management. Bookstaber received a PhD in economics from MIT.
