In September 1998 Long-Term Capital Management (LTCM), a hugely successful hedge fund which had generated billions of dollars in seemingly risk-free profits, came crashing down to earth.
The 14 biggest investment banks in the world saved themselves by providing a $3.5 billion (€3.39 billion) cushion to support LTCM while it was dismantled. Federal Reserve chairman Alan Greenspan cut interest rates to revive world markets.
Nobel Prize winners Robert C. Merton and Myron Scholes, together with Wall Street giant John Meriwether, had founded LTCM in 1993. "With catch-phrases such as `risk management' and `financial engineering', these visionaries were cherished for bringing the discipline of science to what had once been a form of guesswork," writes Nicholas Dunbar.
LTCM had done for trading and investment what the Apollo space programme had done for lunar exploration.
In early 1998, LTCM increased its portfolio of assets to $130 billion and commanded a derivatives portfolio with a notional value of $1.25 trillion.
How this collapse could cause global panic is the subject of Dunbar's cautionary tale.
Inventing Money is about genius and greed which serves as a beginner's guide to trading and speculation - starting in ancient Babylon and taking in the US civil war, the 1929 Wall Street crash and beyond.
The October 1987 stock market crash was an omen of impending disaster - a warning that human behaviour and mathematical models will not correlate.
The Wall Street securities firms and banks behind the bailout were punished in the stock market. In early October 1998, Merrill Lynch shares were 75 per cent of their value at the beginning of the year, Lehmann Brothers' fell to 60 per cent - Goldman Sachs had cancelled its initial public offering.
Retribution was swift. This is what happened to the unsuspecting victims trying to log on to their computers after arriving in work. "Finding his password was invalid, he would call the IT department for assistance. Instead of an IT manager, however, security guards would then arrive and frog-march the hapless trader out of the building."
Inventor Isaac Newton lost £20,000 - a fortune in today's money - in the South Sea Bubble pyramid investment scheme in 1720. Perhaps he should have the last word: "I can calculate the motions of heavenly bodies, but not the madness of men."
