A few months ago, I had the good fortune of meeting a fairly well-known commentator on the derivatives market. Upon shaking his hand, introducing myself and informing him where I work, he said "I think I once sold derivatives to you." Then he paused for a moment and in solemn earnest added, "I'm sorry."
Contrition is in short supply in Satyajit Das's Traders Guns & Money, an amusing, down-to earth look behind the scenes of the derivatives market. Das has 25 years experience working on both the sell side and the buy side, and offers a somewhat disturbing look at who buys and sells derivatives. Das definitely takes the opposite side of Alan Greenspan, who has waxed lyrically about the risk mitigation offered by derivatives. Das argues that risk has increased with the proliferation of derivative products as buyers often don't know what they're buying, and sellers create products to sell to clients whether those products are suitable for the client or not. More worrisome, Das argues derivatives have increased and hidden the leverage within the financial system
The book is an easy to read compilation of anecdotes and explanations of simple derivatives products. Well, as easy to read when equations are involved. There were several times I laughed out loud, and the story in the prologue about the US investment bank suing an Indonesian noodle maker in a British court is alone worth the price of the book.
I found Traders Guns & Money by accident whilst on vacation and looking to cash in a gift card in the disappointingly lacking business section of a faraway Barnes and Nobles. I sure am glad I did.
I give the book