This is an excellent book. First a little background. In the mid-1990s the hedge fund (hedge funds are pools of money, like mutual funds, that take specific kinds of bets on the stock or bond markets. Some specialize in derivatives, others are short on the market, others are long on the market and still others specialize in bonds) industry began to boom. One of the catalysts to the boom was the establishment of a fund called Long Term Capital.
The fund was established by a group of very smart - Nobel prize winners, MIT mathematicians, Harvard finance gurus and industry heavy weights - people who defected from what is now Citibank. They went out and raised what, at that time, was an unheard of amount of money. They then borrowed against that money and purchased various kinds of bond related derivatives. They took an almost purely mathematical view of the capital markets and built complicated financial models for almost every kind of asset. For example, their models would tell them when German interest rates were abnormally high compared to French interest rates. So they would short French bonds and buy German bonds and make some money on the spread between the two.
In the late 1990s, however, things began to go dramatically wrong. At this point Long Term Capital had investments amounting to about $150 billion. The downward spiral began with the credit crisis precipitated by Russia's default on its international debt and the international community's reaction to the default.
This book is the story of what happened once things started going wrong. The book is well written and reads like a thriller more than a business book. Highly recommended.
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