THE DEVIL'S DERIVATIVES
My Decade Following the Financial Alchemists
and their Failed Regulators on the Road to Perdition

Praise for Nicholas Dunbar’s work

'Inventing Money' is a brave and ambitious book… a highly readable account of a financial drama of the highest kind – INDEPENDENT

A substantial primer on the history of financial theory, not least because of Mr Dunbar’s knack for colorful parallels that illuminate his arguments – THE NEW YORK TIMES

THE DEVIL’S DERIVATIVES reveals the untold inside story of modern financial innovation: how investment banks, rating agencies and hedge funds constructed the most toxic financial products of all time, how investors from Hamburg to Seattle were wooed into buying them, and how regulators were seduced by the political rewards of easy credit and let the bankers to loot and pillage the financial system.

Nicholas Dunbar popularizes this technical complex world by explaining the revolution that briefly gave finance the same intellectual respectability as theoretical physics. He explains how by juggling risks and rewards like atoms and molecules, bankers created a secret trillion-dollar machine that delivered cheap mortgages to the masses and riches beyond dreams to the innovators – and thus replaced traditional banks with armies of Cayman Island androids created by computer programs. Along the way he introduces the compelling characters behind this financial revolution, from Machiavellian investment bankers who concocted the schemes, to the blinkered government bureaucrats who were too cowed to intervene.

Fundamental to his story is how 'the people who hated to lose' were persuaded to accept risk by 'the people who loved to win'. Why in the first place did people come to accept that the use of arcane financial tools was safe and positive for society? How did bankers compete to assemble the basic components into increasingly complex machines, and how did this process achieve its own unstoppable momentum? Why were regulatory whistleblowers sidelined, rating agencies corrupted and how did a handful of hedge funds make a killing from the near collapse of the financial system?

In answering these and other questions, Nicholas Dunbar reveals how, after convincing so many people of its benign nature, the financial industrial revolution turned on its creators and triggered the credit crisis that began in the summer of 2007. With exclusive access to key participants, he shows how what started out a breakdown in one arcane corner of the market spread like an atomic chain reaction. By the autumn of 2008, when Lehman Brothers collapsed and the world’s mightiest financial institutions had to be bailed out by the taxpayer, the danger and intellectual overreach of the trillion-dollar machine was obvious to all.

Nicholas Dunbar is uniquely placed to tell this story. As well as proven narrative skills, he worked for a decade as technical editor at a key industry journal that brought him far closer to the risk management industry and its regulators than most mainstream financial journalists. THE DEVIL'S DERIVATIVES will therefore be of interest to a broad range of readers, from business and finance professionals, through policymakers and researchers, to individual savers and borrowers, as well as to the millions of ordinary people around the world who have been affected by the crisis and are looking for answers.

Publisher: Yale University Press (UK)/Harvard Business School Press (US)
Delivery: November 2009
Pub date: Spring 2010
Status: Draft manuscript
Length: 90,000 words

All rights available excluding:
UK & Commonwealth, US, Japan (Kobunsha)