Codes of Finance is an unusual, provocative, 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 blamed for triggering the global financial crisis of 2008. The book takes readers 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.
Vincent Antonin Lépinay (MIT), a former employee of the bank, investigates the journey of a derivative through the bank’s front, middle, and back offices. In the process, he 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.
Essential reading for economic sociologists and financial economists, as well as for readers curious to decipher modern finance, this is the first serious study of the intellectual and organizational puzzles raised by the controversial products of contemporary financial engineering.