Introducing an Important Book
on Stock Market Crashes
by Bruce I. Jacobs

Table of Contents Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes Foreword: Harry M. Markowitz, Nobel Laureate Introduction Section I: From Ideas into Products 1. Options and Option Replication Options How Options Took Off Replicating Options Real vs. Synthetic Options A Risk Posed 2. Synthetic Portfolio Insurance: The Sell Asset Protection Enhanced Returns Unleashing the Aggressive Investor Locking in Gains Pension Fund Benefits Beyond Equity Job Security "No Unhappy Surprises" 3. A Free Lunch? Sacrificing Wealth Implementation Pitfalls Job Insecurity 4. Who Needs It? An Alternative: Buy Low and Sell High Strategies in Practice Section II: The Crash of 1987: A Reality Check 5. The Fall of a Reigning Paradigm An Efficient Crash The Fundamental Things The Psychic Crash 6. Animal Spirits Patterns Noise Overoptimism Feedback Trading 7. Bubbles, Cascades and Chaos Bubbles Informational Cascades Chaos 8. Futures and Index Arbitrage The Futures - Stock Interface The Mixed Evidence Arbitrage and the Crash A Massive Liquidity Event Section III: How Dynamic Hedging Moved Markets 9. Synthetic Puts and the 1987 Crash: Theory A Fad An Informational Cascade Insurance, Arbitrage and Liquidity 10. Synthetic Puts and the 1987 Crash: Evidence Before the Crash Black Monday Roller Coaster Tuesday Brady Commission and SEC Views 11. Alibis I: The U. S. Crash No Bounce Back Insurers Far from Only Sellers Investors Would Have Sold Anyway Insurance Sales Insufficient Insurance Trades not Correlated with Market Moves 12. Alibis II: Across Time and Space Explaining the 1929 Crash Stocks Not in the S&P 500 Crashed Explaining the International Crash 13. Did Insurance Live up to Its Name? Crash Conditions Whipsaws A Retreat Why It Failed Section IV: Option Replication Resurrected 14. Mini-Crashes of 1989, 1991 and 1997 Friday the 13th, October 1989 November 15, 1991 Testing the Brakes: October 27, 1997 15. Sons of Portfolio Insurance Sunshine Trading Supershares Options Reborn Expanding the Listed Option Menu Synthetic Warrants, Swaps and Guaranteed Equity 16. The Enduring Risks of Synthetic Options Risks to Buyers Risks to Dealers Risks to Markets 17. Living with Investment Risk Predicting Market Moves A Long-Run Perspective A Premium for Patience 18. Late Developments: Awful August 1998 and the Long-Term Capital Fallout Behind the Price Moves Long-Term Capital: A Hedge Fund in Need of a Hedge A Frenzied Fall Deja Vu Epilogue Appendix A: The Continuing Debate Appendix B: Option Basics Appendix C: Option Replication Appendix D: Synthetic Options vs. Static-Allocation Portfolios Glossary Bibliography Index Back to Top