Book Review > INVENTING MONEY The Story of Long-Term Capital Management and the Legends Behind It

The sub-title of this book tells us much about its core content. Inventing Money appears to be a well researched and intriguing insight into the rise and fall of Long-Term Capital Management. However, it is more than that, as the author sets the scene by outlining the evolution of both finance theory and the derivatives markets (interesting reading in itself) that played key roles in the formation and demise of LTCM. In setting the scene Dunbar details the involvement of the central players in LTCM in the evolutionary processes and what brought them together to construct a once great financial infrastructure.

The author's scientific background is reflected in his writing as he links the evolution of finance theory with the laboratories and lecture halls of Victorian science, and with statistics.

At its peak LTCM commanded funds of US\$130 billion and a derivatives portfolio with a notional value equivalent to the entire US Government budget. Until 1998 LTCM delivered staggering profits - then, as many will recall, it all went very wrong and US Federal Reserve Chairman Alan Greenspan was forced to take emergency action.

The book provides worthwhile reading for anyone interested to learn more about one of the major events in the world of finance in recent times. It will also interest those involved in, or having an interest in, proprietary trading and the hedge fund industry, as well as anyone interested in a brief overview of the evolution of the derivatives markets.