Usually these types of book take a well trodden route - the 1987 crash, Kidder Peabody, Barings, LTCM and so on. Similarly they are usually written by seasoned financial journalists with an eye for the extreme and the salacious. On the first count this book is no different. On the second however Bookstaber's story is a very different one. As he points out very early on in his treatise, not only was he there at the time of these happenings, but for the most important events (the Portfolio Insurance debacle and the LTCM crash) he was actually directly involved - selling PI when he was at Morgan Stanley and acting as Head of Risk Management at Salomon's as "Saloman North" (i.e. LTCM) collapsed.

Despite the fact that Bookstaber is a pointy-headed academic from MIT, he writes well and cogently - even for the unitiated reader. As an asset management person myself, he also gives a wonderful representation of the workings and culture of a Wall Street Investment Bank and the poitical machinations and ruthlessness of the individuals that work therein (bankers are people with pointy elbows as my wife likes to say).

The book therefore tells an autobiographical journey from academia to Hedge Funds via a couple of Wall Street behemoths. He paints a none-too-optimistic picture of the various "events" that befell the investment commuity in those years (perhaps strange for a Risk Manager) but interestingly does not lay blame at the feet of any individuals or institutions, but rather decomposes the events to find that the issues lay in the interconnectedness of the markets and firms in those markets that caused the "liquidity spirals" that were a consequence of much smaller events and that then led to such large losses for those concerned.

I found his final conclusions strangely in agreement with the message that I am delivering to my current client. Firstly (again oddly for a Risk Manager) he says that Risk Management of known risks is basically a huge waste of money - as the risks that you need to manage are actually those that you do not know of (though he is of course coming from the point of view of a Wall St Investment house who spend most of their time and money hedging everything that moves - I would not recommend that a long only manager take this attitude!). And secondly that Hedge Funds will not be the strange "Alternative" group that people seem to think that they are today. In time they will become the norm. This - he reasons - is because Hedge Funds are essentially unquantifiable. They are merely pursuing an infinite number of different holding/trading/sectoral strategies unconstrained by the investment mandates of the long only world. However over time the long only world must die out by the very fact that there will always be a competing number of hedge funds to each long only fund that are not constrained and should therefore generate better returns. Lastly he critques the paradigm of the efficient market and suggests that we would be better off watching our liquidity levels and modelling them rather than running too many mathematical models based on this premise.