Rating: 
Summary: Captivating
Review: When reading this book, I had a strange deja vu feeling.All of this sounded very familiar to me: an overconfident group of very intelligent people, inventing and implementing complex strategies with complete confidence that they are failproof and that no matter what risky things they do, nothing can possibly go wrong. Finally, I realized where I have seen a very similar scenario: a description of a failed (and foolish) experiment which lead to a Chernobyl nuclear disaster in 1986. Similarities in arrogant attitudes of main dramatic personae are indeed striking. Dunbar created a fascinating account of the world of financial engineering (aka financial alchemy). He does an outstanding job of describing complex financial strategies with the minimum of technical baggage (though, I think, the book could benefit from a diagram or two). Highly recommended for anyone interested in financial engineering!
Rating: 
Summary: A good read for people interested in finance
Review: While Lowenstein's account of the Long-Term Capital Management debacle is more fascinating, Dunbar's book provides more "meat" for those interested in the backdrop of the historical event. Starting with a brief history of speculation and progressing to finance theory, "Inventing Money" places the Long-Term saga in a historical context. Indeed, almost half of the text has nothing to do with Long-Term directly, but Long-Term was not created in isolation. People from academia and "the Street" made its existence possible, and this book chronicles its development very well. A bit more technical than "When Genius Failed," this book gives the reader lots of background material on the theory behind what Long-Term was supposed to do: namely, arbitrage. As a Ph.D. student of financial economics, I found Dunbar's explanations easy to understand, but I can also see that they will be quite obfuscating to non-specialists in this area. The second part, about Long-Term's dealings, is easier to understand for everyone. While his account of what transpired to Long-Term is not as vivid as Lowenstein's, I think Dunbar does a laudable job at keeping the story flowing. BTW, the paperback addition has a thoroughly updated last chapter, "Aftermath." If you are interested in the Long-Term story, both books are worth keeping. If you have to choose, go with "Inventing Money" if you are also interested in the history of finance theory and financial engineering; if you prefer an "insider's view," "When Genius Failed" would be a better choice.
Rating:
Summary: A good read for people interested in finance
Review: While Lowenstein's account of the Long-Term Capital Management debacle is more fascinating, Dunbar's book provides more "meat" for those interested in the backdrop of the historical event. Starting with a brief history of speculation and progressing to finance theory, "Inventing Money" places the Long-Term saga in a historical context. Indeed, almost half of the text has nothing to do with Long-Term directly, but Long-Term was not created in isolation. People from academia and "the Street" made its existence possible, and this book chronicles its development very well. A bit more technical than "When Genius Failed," this book gives the reader lots of background material on the theory behind what Long-Term was supposed to do: namely, arbitrage. As a Ph.D. student of financial economics, I found Dunbar's explanations easy to understand, but I can also see that they will be quite obfuscating to non-specialists in this area. The second part, about Long-Term's dealings, is easier to understand for everyone. While his account of what transpired to Long-Term is not as vivid as Lowenstein's, I think Dunbar does a laudable job at keeping the story flowing. BTW, the paperback addition has a thoroughly updated last chapter, "Aftermath." If you are interested in the Long-Term story, both books are worth keeping. If you have to choose, go with "Inventing Money" if you are also interested in the history of finance theory and financial engineering; if you prefer an "insider's view," "When Genius Failed" would be a better choice.
Rating: 
Summary: A Noble But Failed Effort
Review: With "Inventing Money", Nicholas Dunbar undertakes a noble task - to explain in financial terms not just what happened to Long Term Capital Mangement, but why. If he intended his audience to be limited to sophisticated industry insiders, he very well may have accomplished his objective. If, on the other hand, he intended his audience to be non-insiders eager for a basic understanding of the investment world in which LTCM was participating, he failed miserably. While the first half of "Inventing Money" is an interesting read about the historical background of today's financial world, the second half is an incomprehensible mishmash of a discussion conducted in gibberish. Consider a brief excerpt: "When delta-hedging a call option in this way, the dealer
is having to play catch up - buying the index after it
has risen, and selling after it as (sic) fallen. The
strategy always loses money over the life of the option
- as it must, because it is simply the option's mirror
image. By the law of no-arbitrage, this loss when added
up over the entire garden of forking paths, must be equal
to the premium charged for the option." Now consider page after page after page of such explanations. One gets the sense that Dunbar - a physicist with an interest in quantum mechanics and black holes - seems more interested in hearing himself speak than in whether any of his readers are still interested, and by the end of the book, its doubtful that many are. The story of LTCM's rise and fall is fascinating. In his book "When Genius Failed", Roger Lowenstein has done an excellent job of telling the story of the players and the events, though, perhaps aware of the extremely complicated nature of the topic, has avoided trying to explain the story in any depth from a financial perspective. While Dunbar can be commended for making an attempt, he unfortunately fails miserably n his effort to deliver a comprehensible and readable story. One can only wish that someone with John McPhee's skills for explaining complicated topics in understandable terms would take up the task.
Rating:
Summary: A Noble But Failed Effort
Review: With "Inventing Money", Nicholas Dunbar undertakes a noble task - to explain in financial terms not just what happened to Long Term Capital Mangement, but why. If he intended his audience to be limited to sophisticated industry insiders, he very well may have accomplished his objective. If, on the other hand, he intended his audience to be non-insiders eager for a basic understanding of the investment world in which LTCM was participating, he failed miserably. While the first half of "Inventing Money" is an interesting read about the historical background of today's financial world, the second half is an incomprehensible mishmash of a discussion conducted in gibberish. Consider a brief excerpt: "When delta-hedging a call option in this way, the dealer
is having to play catch up - buying the index after it
has risen, and selling after it as (sic) fallen. The
strategy always loses money over the life of the option
- as it must, because it is simply the option's mirror
image. By the law of no-arbitrage, this loss when added
up over the entire garden of forking paths, must be equal
to the premium charged for the option." Now consider page after page after page of such explanations. One gets the sense that Dunbar - a physicist with an interest in quantum mechanics and black holes - seems more interested in hearing himself speak than in whether any of his readers are still interested, and by the end of the book, its doubtful that many are. The story of LTCM's rise and fall is fascinating. In his book "When Genius Failed", Roger Lowenstein has done an excellent job of telling the story of the players and the events, though, perhaps aware of the extremely complicated nature of the topic, has avoided trying to explain the story in any depth from a financial perspective. While Dunbar can be commended for making an attempt, he unfortunately fails miserably n his effort to deliver a comprehensible and readable story. One can only wish that someone with John McPhee's skills for explaining complicated topics in understandable terms would take up the task.
Rating:
Summary: A Noble But Failed Effort
Review: With "Inventing Money", Nicholas Dunbar undertakes a noble task - to explain in financial terms not just what happened to Long Term Capital Mangement, but why. If he intended his audience to be limited to sophisticated industry insiders, he very well may have accomplished his objective. If, on the other hand, he intended his audience to be non-insiders eager for a basic understanding of the investment world in which LTCM was participating, he failed miserably. While the first half of "Inventing Money" is an interesting read about the historical background of today's financial world, the second half is an incomprehensible mishmash of a discussion conducted in gibberish. Consider a brief excerpt: "When delta-hedging a call option in this way, the dealer
is having to play catch up - buying the index after it
has risen, and selling after it as (sic) fallen. The
strategy always loses money over the life of the option
- as it must, because it is simply the option's mirror
image. By the law of no-arbitrage, this loss when added
up over the entire garden of forking paths, must be equal
to the premium charged for the option." Now consider page after page after page of such explanations. One gets the sense that Dunbar - a physicist with an interest in quantum mechanics and black holes - seems more interested in hearing himself speak than in whether any of his readers are still interested, and by the end of the book, its doubtful that many are. The story of LTCM's rise and fall is fascinating. In his book "When Genius Failed", Roger Lowenstein has done an excellent job of telling the story of the players and the events, though, perhaps aware of the extremely complicated nature of the topic, has avoided trying to explain the story in any depth from a financial perspective. While Dunbar can be commended for making an attempt, he unfortunately fails miserably n his effort to deliver a comprehensible and readable story. One can only wish that someone with John McPhee's skills for explaining complicated topics in understandable terms would take up the task.
Rating:
Summary: Entertaining story about Long-Term Capital Management
Review: Written by derivatives journalist Nick Dunbar, Inventing Money is an entertaining and mostly accurate accounting of the people behind Long-Term Capital Management and the events that brought them, LTCM, and global financial markets to their knees in 1998. As Dunbar makes clear, the reinsuring of structured equity products sold in Europe (which are designed to provide the stock market's upside potential without its downside risk) was LTCM's second biggest losing bet. These products contain an embedded long-dated index call option, which requires hedging with automated trend-following trading rules-that is, buying as the market rises and selling as it falls. This "option replication" hedging is a form of positive feedback, like a household thermostat that's gone berserk--calling for more heat when the house is hot, and for more cooling when the house is cold. This positive feedback trading whips up market volatility, creating its own volatility storms, and causing markets to crash as investors flee in panic. This occurred most notably in October 1987, in the fall of 1997, and again in summer and fall of 1998. Bruce I. Jacobs (cimr@jlem.com), Principal, Jacobs Levy Equity Management, and author of Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes, Blackwell Publishers, 1999.
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