The second is The Quants by Scott Patterson. It details the meltdown they suffered in August 2007 (something that I wasn't even aware of) as well as the history of hedge funds – mainly Ed Thorp's role in developing quantitative methods to exploit mispricing in the convertible bond market for corporate bonds. I view the role of the quants as peripheral to the crisis although the book explains how stock prices can rise in the midst of a crisis as the Dow was doing. The quants have to buy massive amounts of stock to return to the prime brokerages the stock they borrowed as they attempt to unwind their positions, if I understand this correctly. The book also offers small glimpses into the their world and it would seem that all of the characters have a penchant for gambling (card counting in Vegas seems to be an induction rite while in college) and graduating to high stakes poker after they have made their billions. The book started off really badly (for me) though:
Peter Mueller stepped into the posh Versailles Room of the century- old St. Regis Hotel in midtown Manhattan and took in the glittering scene in a glance. It wasn’t the trio of cut-glass chandeliers hung from a gilt-laden ceiling that caught his attention, nor the pair of antique floor-to-ceiling mirrors to his left, nor the guests’ svelte Armani suits and gem-studded dresses. Something else in the air made him smile: the smell of money. And the sweet perfume of something he loved even more: pure unbridled testosterone fueled competition.Fortunately, the prose got better (or at least not worse) later.
These two events caught me somewhat by surprise, especially since I thought I was keeping tabs on the crisis. I had heard of John Paulson's trade long after the fact when he had to testify