Codes of Finance: Engineering Derivatives in a Global Bank

Investment banks are enormously important, yet few social scientists have been inside them. Vincent Antonin Lépinay (MIT), a former bank employee, presents in his new fine book Codes of Finance: Engineering Derivatives in a Global Bank rich and fascinating ethnography, taking the reader through the front and back offices of derivatives trading and shedding a new light on our conception of organizations, innovations, profit, and speculation.
Codes of Finance is an unusual and compelling account of today’s structured financial products. The financial industry’s invention of complex products such as credit default swaps and other derivatives has been widely and rightly blamed for triggering the global financial crisis of 2008. The book takes us behind the scenes of the equity derivatives business at one of the world’s leading investment banks before the crisis, providing a detailed firsthand account of the creation, marketing, selling, accounting, and management of these financial instruments–and of how they ultimately created havoc inside and outside the bank.
Lépinay provides a rare look at the strange world of quants, traders, salespeople, accountants, and others involved in a self-annihilating form of life in which securities designed by the bank eventually threaten its infrastructure. Throughout, he tries to understand the baffling languages of engineered financial products and the often-conflicting bodies of expertise that are mobilized to create them.
Codes of Finance highlights the massive costs of investment banking’s hubristic dream of manufacturing global financial services that derive their value from multiple economies across the world. Yet the book challenges simplistic condemnations of financial engineering by showing that derivation is the central operator of economic life–stretching far beyond the phenomenon of financial derivatives themselves.
Lépinay’s superb book is a vital and enlightening read for economic sociologists and sociologists of knowledge. After all, as Bruno Latour put it, the book “is an important step toward solving the mystery of the lack of mastery in the world of finance.” (Open access to the introduction)