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This is an entertaining and information book that examines the
increasing role derivatives, forex and OTC trading plays in modern banking. It was written
before 1997 but it remains a very good coverage of the subject area. In this sense it is
prescient in terms of some of the derivative meltdowns that developed in later years.
Unfortunately there is little evidence that regulators have learnt from the mistakes prior
to 1997, or later.
The rise in popularity of OTC products like Cash For Difference and
spread betting contains the same type of counter party risk as explored in this book.
Individual traders like to think they are immune from systemic risk just as the
banks did in the late 1990s. This book encourages us to think again. Exchange based
trading where counter party settlement is guaranteed offers a high level of protection in
an unstable financial world.
We are well accustomed to articles on historical equity driven bubble market crashes. We
are less accustomed to understanding the role derivatives played in these crashes. The
first systematic description of options and futures trading was written in 1688. All that
has changed is the speed of trading. Despite the fancy mathematics, the risks remain
This is a book well worth buying if you see it on the remainder
shelves. It was one of the first insider accounts of derivative trading.
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