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When Genius Failed, by Roger Lowenstein.    Meet the Tom Clancy of financial journalists.  This 2000 book mixes one part modern high finance with one part hard-to-put-down thriller and comes up with a fascinating description and analysis of the rise and fall of the ballyhooed Long Term Capital Management hedge fund.  With two high-powered economics professors on board, this fund's managers seemed to feel that higher math represented the solution to the eternal quest for easy wealth.  However, as the reader will discover, mathematics is no more powerful than the assumptions that underlie its usage.  (Garbage in, garbage out.)  In the classroom, economists make convenient assumptions not because they are always valid, but because they help illustrate important points.  However, in the competitive world of money management, assumptions that aren't valid in certain instances can lead to dramatic failures.  Indeed, this fund's spectacular 1998 demise came perilously close to upsetting the world's financial system.  The reader of this book will see that there's much more to "risk arbitrage" than effortlessly vacuuming up billions of nickels and dimes.  If you think economics and finance are boring, this book will quickly convince you otherwise.

ISBN: 0375758259
Format: Paperback, 288pp
Pub. Date: October 2001
Publisher: Random House Publishing

 

 

 

 

 

 

"This book is story-telling journalism at its best."

The Economist