December 2014


LIBOR is the reference rate for 70 percent of the U.S. futures market, most of the swaps market, and nearly half of U.S. adjustable-rate mortgages. LIBOR, undoubtedly can be called the world’s most important number. It was conceptualized to meet a certain need, i.e. “what rate should be used for a floating rate note? “. Primarily it was used in the payoff computation of Eurodollar futures and subsequently it was used in interest rate swaps, derivatives on interest rate swaps, basis swaps, mortgages etc. The fact that LIBOR became a rigged rate was known to a few people in the financial world, i.e. rate traders, derivative traders, hedge fund managers, agencies that published LIBOR every morning. However it was known to a far wider audience after the 2008 WSJ article that screamed, “Emperor is naked ”. The title of this book is apt as it describes the situation before the regulatory agencies took action. Everybody knew what’s going on but nobody said anything. Too much was at stake.

The book reads like some crime thriller based in some fictional land; the only difference is that it is a true story and the victims are state governments, municipalities, rail transport authorities, and many other institutional investors who have lost billions of dollars. The perpetrators in the story are yet to given punishment. Yes, some of them have quit their jobs but NOBODY is yet behind bars! The most saddening aspect of the story is there have been merely a few cosmetic changes made to LIBOR and it is still being used as a reference rate in market place. The book talks about few people who singlehandedly tried to fight against LIBOR. Sadly, their voices were squashed as there were too many people who wanted status-quo. Several traders are going to be tried in 2015 and the author hopes that some justice would be doled out.

By the end of the book, a reader is left with an uneasy feeling about financial markets. If LIBOR can be rigged, what other benchmarks are currently being rigged? Is ISDAFIX being rigged? Is there a currency-fixing scandal waiting to be uncovered?

If you are curious to know the answers to any of the following questions, then the book might be worth a read.

  1. How did two WSJ journalists uncover the fact the LIBOR was rigged? Why did they analyze Credit Default Swap market?
  2. What were the political and economic conditions that led to the flourishing of Eurodollar business?
  3. How was LIBOR computed by British Bankers Association?
  4. LIBOR was set by primarily UK based banks. So, why was it being used as a reference rate for student loans, mortgage loans in US?
  5. What role did interbank brokerage companies play in manipulating LIBOR?
  6. Did Bank of England know about the fact that LIBOR was rigged?
  7. Did U.S Treasury know about the fact that LIBOR was rigged?
  8. What was modus operandi for manipulating LIBOR rate?
  9. How did Tom Alexander William Hayes, Yen-LIBOR trader, manage to rig LIBOR?
  10. Why did banks quote artificially low offer rates when polled every morning?
  11. What was the role of Barclays bank in the whole affair? Why did Bob Diamond resign after the scandal erupted?
  12. Why did British Banker’s association try to cover up the whole affair after WSJ article? What was their motive?
  13. If there were no subprime crisis in US, do you think LIBOR sham would have been exposed? Why or Why not?
  14. Why didn’t the regulators act ?
  15. Who were the major hedge funds involved in the controversy ?
  16. Why did Gensler, the former chairman of CFTC, fail in his mission of abolishing LIBOR?
  17. Interest rate swaps are complicated to value. So, why did municipalities, railways etc. fall in to the trap of investing in them?
  18. Why did Charles Schwab file suit against Wall Street banks?
  19. What happened to traders implicated in LIBOR and EURIBOR scandals?
  20. Post LIBOR scandal, what changes have been made to compute LIBOR?
  21. Is ISDAFIX benchmark rigged too?
  22. Should IR swaps be traded on an exchange? Why did Gensler’s effort in pushing reforms for IR swaps trading, go in vain ?
  23. Was LIBOR waiting to be rigged? Could there have been a better mechanism to capture reference rate?
  24. People have lost faith in benchmark rates and increasingly we are seeing manipulation is not the exception but the rule. Does the author have any suggestions for restoring investors’ faith in benchmark rates?


This book is a TED book, i.e. a book paired with a TED talk so that ideas mentioned in the talk are explored in a little more detail. At the same time, TED books are intended to be short so that one can comfortably read it one sitting. This book is about 75 pages. The author gives various anecdotes from his life and encourages the reader to find “Nowhere” in one’s daily/weekly schedule so as to practice “Stillness”.

It’s only by taking myself away from clutter and distraction that I can begin to hear something out of earshot and recall that listening is much more invigorating than giving voice to all the thoughts and prejudices that anyway keep me company twenty-four hours a day. And it’s only by going nowhere — by sitting still or letting my mind relax — that I find that the thoughts that come to me unbidden are far fresher and more imaginative than the ones I consciously seek out. Setting an auto-response on my e-mail, turning off the TV when I’m on the treadmill, trying to find a quiet place in the midst of a crowded day or city – all quickly open up an unsuspected space

When friends ask me for suggestions about where to go on vacation, I‘ll sometimes ask if they want to try Nowhere, especially if they don’t want to have to deal with visas and injections and long lines at the airport. One of the beauties of Nowhere is that you never know where you’ll end up when you head in its direction, and though the horizon is unlimited, you may have very little sense of what you’ll see along the way. The deeper blessing is that it can get you as wide-awake, exhilarated, and pumping-hearted as when you are in love.

— Pico Iyer


This book is mainly targeted towards R-newbies who have managed to learn some basic R syntax and are looking for some guidance on writing functions in R. The key idea that one needs to understand before writing functions is the way R organizes objects in various environments. The author explains this idea using the analogy of “file system in a computer”. The book uses two examples, 1) shuffling a deck and dealing cards from it 2) simulating the outcomes of a slot machine. The code is extensively annotated so as to make it easy for any reader to thoroughly understand each code fragment. Even though the examples used in the book are very simple, the author manages to cover quite a number of key concepts of the R language.

Here is a suggestion to someone who thinks he/she is too good at R programming : Code up your own slot machine based on the description given in chapter 7. Check the time your code takes to simulate 10 million slot machine payoffs. See if your code does better than the author’s code that takes up just 23 seconds.

For me, the takeaway from this book is the following visual cue useful to remember about R environments :