A Week in December by Sebastian Faulks

Greek letter, and the relationships between them further Greek letters, so that some of the quants ended up with worksheets that looked like a page from the Iliad .
    It was mostly, in Veals's view, absolute piffle. A trade was a trade, and it was driven by two things only: greed and fear. Gamma for Greed if you insisted on talking Greek, said Veals; but, well, 'The Greeks had no letter for F,' he had more than once remarked.
    For two hours they discussed the virtues of 'puts' and 'calls'. Traditionally such instruments had existed as insurance: by limiting their exposure to future price fluctuations, companies could use them to smooth out their forecasts and their cash flows. But turn a safety mechanism upside down and, hey presto, you have a gambling instrument. Through 'calls', High Level could trade with people who took the view that the ARB price would rise, or were at least prepared to name a figure that would reward them if it did; through 'puts' High Level could express their own conviction that the price would fall. The danger in the dual strategy Veals outlined was that they were not using one position to 'hedge' against the other; on the contrary, the success of both trades relied on the same thing: they were simply doubling their bet on the chosen outcome.
    'Shit.' Duffy seldom swore. 'Do you know something I don't know, John?'
    'Trust me,' said Veals.
    Duffy stared into his coffee, saying nothing for a minute. Eventually he lifted his head. 'OK, John. It's not my fund. It's your baby. I'll do what you ask.'
    Veals nodded. 'But I'm worried that we might blow out the counterparty. I don't want one of them to collapse and default on the trade.'
    'We have to spread it across the whole industry,' said Duffy. 'It's time we called in a few favours. You've got every prime broker in the world as well as half the hedge funds gagging for a bit of the action. I can get some special terms. Then people will see the banks' names not ours listed on the trades. They won't know it's us they're dealing with.'
    Veals ordered more coffee. 'If ARB goes down,' he said, 'it's possible the amount of bad debt in all the other banks will make their share prices plummet too. The whole banking sector could be in trouble. There'd be panic on the high street. Mrs Smith's PS10,000 life savings. Queues round the block. The government would have to guarantee the savers. And to do that, they'd have to increase their own borrowing by half overnight.'
    'And that would have a huge effect on the price of government debt,' said Duffy.
    'Yes it would,' said Veals. 'On gilts. So we take a position on gilts.'
    Duffy smiled slowly. 'And then,' he said, 'there's the currency. The extra government debt would mean that sterling gets hammered - even against a shaky dollar.'
    'Well,' said Veals, putting down his cup. 'I think we have the makings of something.'
    He almost smiled. The reason he particularly liked the sterling aspect of the trade was that the currency market was almost completely unregulated.
    'Do you want lunch?' said Duffy. 'We could go to that Spanish place I'm always telling you about.'
    'What? And be seen by a whole lot of hedge-fund managers? For fuck's sake, Kieran. I'm not hungry. My car's outside. I'll get him to take me back to the airport. I'll call tonight at five. On your cellphone.'
    'All right. What are we going to call this trade, John?'
    Veals and Duffy always had code names for sensitive trades, just as an extra protection.
    'I suppose,' said Veals, 'in view of all the pension business we could call it ... What about "Rheumatism"?'
    'Fine. Rheumatism it is. So long, John. Been nice seeing you.'
    Kieran Duffy stood outside the steamed-up coffee shop and watched the lean figure of John Veals crunch a homburg on to his head and climb into the grey saloon.
    Some hedge funds had narrow specialisations, but Veals and Godley always intended to deal across the whole financial carte . Veals dreaded boredom and he feared missing any