Few professionals have the depth of perspective on the many market risk events that were missed by the models as Rick Bookstaber. Trained at MIT where he received a PhD in economics, Rick would become Morgan Stanley’s first risk manager in 1984. There, and also at Salomon brothers, Rick was among the quants on Wall Street that developed early pricing models for interest rate derivatives. In this capacity, he had intimate knowledge of the challenges that complex products created for dealers looking to hedge them. And related to this, he also had a front row seat to the early debacles of modern markets including the crash in 1987 and the LTCM unwind in 1998. Across two excellent books, Demon of Our Own Design and End of Theory, Rick explores the characteristics of markets that make them inherently fragile, including the notion of tight coupling. Here, feedback between trading, price changes and subsequent trading based on the price changes can give rise to instability. Today, Rick is the founder of Fabric RQ, a firm delivering risk management solutions to the RIA community. Among the issues Rick worries about today include SPACs, NFTs and the concentration of richly valued tech stocks in indices like the S&P 500. I hope you enjoy this episode of the Alpha Exchange, my discussion with Rick Bookstaber.