Tuesday, July 7, 2009
Traders, Guns & Money - Satyajit Das
The book is really an exposé, written in a slapstick humouristic style and Satyajit Das does not hold his tongue (pen) in castigating the sub-world of derivatives in the financial system. Das has worked in the field of derivatives for more than two decades so he knows a lot about them, and most importantly, the actors. The insider information he reveals is not flattering at all.
The leitmotif of this narrative is the Knowns and Unknowns in the derivatives sales process: many corporations do not know that they "need" a product - the sales person (representing some big bank), will present that to the corporation who then realises that it should buy it as the profits it promises are goo. this is an unknown known (how foolish were we not to have realised this! Well, most of them end up being even more foolish to buy this product!)
Then you have the Known Unknown, which refers to the cornucopia of esoteric derivatives with exotic names that we have heard about, but do not know what they do (or what use they have - do they have any use, really?). for example, what does a Double Knockout Currency Option mean? Ah, that, you see is a Known Unknown.
Finally, how much should I pay for a Double Knockout Currency Option? Bless me if I do! That is an Unknown Unknown. This bit is best left to those indulging in arcane models.
What is clear from Das' account is that the universe of esoteric derivatives does not create any further wealth. The derivatives world could be viewed as a system where a zero-sum game is played. What I make in profits is simply what another counter-party is losing. In the epilogue, Das makes an analogy to pari-mutuel auctions. I will say that most of this system is a pari-mutuel. The lsoing betters ultimately pay the successful wagers plus the bookmakers' profits. What this area does seem to create, if you take a magnifying glass to it, is a lot of deceit, misrepresentations and cosmetics to fleece investors and naive corportaions.
Another leitmotif is Das' constant reference to Weapons of Mass Destruction, or WMD (which harken's again to Rumsfeld and that dark era of US military impulsiveness), following Warren Buffet. Derivatives, if not used carefully - remember they are here to shift risk, or hedge against risk - can potentially turn into WMD's.
The whole narrative is held together by the case of a noodle making company from Indonesia and their massive theoretical loss from investing in derivatives peddled to them by a huge US bank. In the end, the parties reach settlement thanks to a change in management at the bank.
Wednesday, August 20, 2008
Life of Pi - Yann Martel
The similarities between the two novels are numerous. Piscine Molitor Patel, like Arthur Gordon Pym, is a very young man and while clever, clearly impressionable. They are both shipwrecked, spend an inordinately long time at sea under tough conditions and along the way survive all sorts of peculiar events, including cannibalism. And of course, the most striking parallel is that both 'sailors' have a companion on their dingy who share the name of Richard Parker. The surprising difference is that while Pym’s Richard Parker is a cabin boy who ends up being eaten, the reader slowly comes to the realization that Pi’s Richard Parker on the other hand, is a 450 pound Bengal tiger who ends up eating a man! However, it may well be that the Bengal tiger is merely a figment of Pi's imagination, and that Pi projects an image of himself in a feline form in his fantastic allegory. I would further like to point that the narrative is reminiscent of Coleridge’s The Rime of the Ancient Mariner, from which, in all likelihood, Poe himself drew extensively to compose The Narrative of Arthur Gordon Pym of Nantuckett.
Yann Martel never fails to entertain either - in fact, he makes good use of humour in his narrative. I found certain passages and episodes quite hilarious. For a start the name of the narrator itself is surreal. The Piscine Molitor, which literally translates from French to Molitor Swimming Pool, is a real place in
Pi’s religious zeal leads him to embrace three religions: Islam, Catholicism and Hinduism. This act occasions some of the novel’s finest comedic moments as, for example, in the scene where the pundit, the priest and the imam meet the whole family on the beach, or as in the continuous lampooning by Ravi, the elder brother
As hinted at earlier, there are elements in the story that suggest that Pi’s narrative is fabricated. For example, quite early Pi reveals that in his childhood fancy, he enjoys dressing up animals in human forms and garbs. So why not dress up humans in animal forms? The alternate story he tells Messrs. Okamoto and
The book is likely to be turned into a movie. Night Shyamalan had initially shown an interest, but word is out that he has abandoned the project. I guess he could not find the type of twist in Yann Martel's story that he is so fond of.