For a clear primer on how financial markets really work, check out the the Visual Guide to Financial Markets by David Wilson.
Mr. Wilson is a familiar voice on Bloomberg Radio, delivering hourly stock reports in his jovial but straight-forward muse. He’s also the guy who puts together Bloomberg’s enlightening “Chart of the day” column.
His book is guide for financial professionals and students alike, explaining everything from the Byzantine world of derivatives to the basic lessons people running some of the biggest banks in the world seem to forget, such as the tradeoff between returns and risks.
“Investors who pay too much attention to the returns can end up suffering unexpected losses when a change in market direction highlights the risks,” writes Mr. Wilson.
And, oh, how the risks get highlighted. Just ask the London Whale at JP Morgan Chase or Jon Corzine at MF Global. The financial world would be a safer, smarter place if the people in charge of our money kept this book on their desks.