"Traders Guns & Money", Satyajit Das

- Knowns and Unknowns in the Dazzling World of Derivatives

Picked up the book while on call in London a few years ago. Read the book half-way through as an in-flight gap filler. Plain speaking, nothing earth shattering but well written. Always wanted to finish it and now maybe is the time.

Here is a quote. I don't think it's original but so long as it is in one place, I am happy. About trades have one-sided share of the profit and loss, i.e. tail I win and face I walk:"...It is the ultimate in capitalism - the privatization of gains, the socialization of losses."

The following offers you a taste or flavor of the book. About the similarities between Manchester United and Cazenove (an English private I-Bank), both in play for a buy-out:

"1. In both cases, the employees creamed off the lion's share of earnings. Players v. Bankers.

2. Both groups of employees argued vociferously about their value to the firm, their short careers and, the risk of injury.

3. They were always threatening to join a competitor and had first call over profits. Shareholders were there to underwrite the losses.

Conclusion: Manchester United would be the better choice. As an owner you would at least get to see the football games. In neither case would you ever see the money." Haha, that's awesome!

The following reminded me why I liked the book a lot, making a dry subject fun to read.

Regarding a risk management conference called, "Risk Management: The New Paradigm": "as a general rule, it is unwise to read or attend anything with the word 'paradigm' in its title."

With reference to U.S. military's DEFCON 1-5 alerts and applying bank risk management:

DEFCON 5: Go to lunch. The noon bells have tolled 'All is well'.

DEFCON 4: Business as usual. Normal indolence and lack of care continues.

DEFCON 3: The smell test tells you that there is a problem. You ask a few questions, being careful not to be told anything that you may regret in hindsight when seeking to avoid culpability.

DEFCON 2: You leann that your traders have lost an unspecified amount of money from the various journalists who ring you for comment. You thank them for letting you know what is really going on.

DEFCON 1: The bank is bankrupt. You're fired. You join the speaker circuit, sharing your experiences with other risk luminaries such as Nick Leeson."

Note: originally posted to Facebook on Sep 3, 2012.