‘Oh, come on,’ said Quarry, ‘stop being so bloody pious. It’s a machine for making money; it’s not meant to be a sodding UN goodwill ambassador.’ He leaned his head against the back of the sofa and looked at the ceiling, his eyes darting, trying to absorb the implications. ‘God in heaven. I mean, I’m simply staggered by that.’
Ju-Long said, ‘It could be a coincidence, of course. As Alex said this morning, the airline short was just part of a whole pattern of bets to the down side.’
‘Yeah, but even so, that’s the only short where we’ve actually sold the position and taken the profit. The others we’re holding on to. Which poses the question: why are we holding on to them?’ He felt a tingling along the length of his spine. ‘I wonder what it thinks is going to happen next?’
‘It does not think anything,’ said Rajamani impatiently. ‘It is an algorithm, Hugo – a tool. It is no more alive than a wrench or a car-jack. And our problem is that it is a tool that has become too unreliable to depend on. Now, time is pressing and I really must ask this committee formally to authorise an override on VIXAL and start an immediate rehedging of the fund.’
Quarry looked at the others. He was good at nuances, and he detected that something had just shifted slightly in the atmosphere. Ju-Long was staring ahead impassively, van der Zyl examining a piece of lint on the sleeve of his jacket. They seemed embarrassed. Decent men, he thought, and clever, but weak. And they liked their bonuses. It was all very easy for Rajamani to order VIXAL to be shut down; it would cost him nothing. But they had received four million dollars each last year. He weighed the odds. They would give him no trouble, he decided. As for Hoffmann, he took no interest in the personnel of the firm apart from the quants: he would back him whatever he did. ‘Gana,’ he said pleasantly, ‘I’m sorry, but I’m afraid we’re going to have to let you go.’
‘What?’ Rajamani frowned at him. Then he tried to smile: a ghastly nervous rictus. He tried to treat it as a joke. ‘Come on, Hugo…’
‘If it’s any consolation, I was going to fire you next week whatever happened. But now seems like a better time. Write it down in your minutes, why don’t you? “After a short discussion, Gana Rajamani agreed to relinquish his duties as chief risk officer, with immediate effect. Hugo Quarry thanked him for all he had done for the company” – which as far as I’m concerned, by the way, is sod all. Now clear your desk and get off home and spend more time with those charming children of yours. And don’t worry about money – I’m more than happy to pay you a year’s salary just for the pleasure of not having to see you again.’
Rajamani was recovering: afterwards Quarry was forced to give him credit for resilience at least. He said, ‘Let me be clear about this – you’re dismissing me simply for doing my job?’
‘It’s partly for doing the job, but mostly for being such a pain in the ass about doing it.’
Rajamani said, with some dignity, ‘Thank you for that. I’ll remember those words.’ He turned to his colleagues. ‘Piet? LJ? Are you going to intervene at this point?’ Neither man moved. He added, slightly more desperately, ‘I thought we had an understanding…’
Quarry got up and pulled the power cable out of the back of Rajamani’s computer. It emitted a slight rattle as it died. ‘Don’t make copies of any of your files – the system will tell us if you do. Turn in your mobile phone to my assistant on your way out. Don’t speak to any other employees of the company. Leave the premises within fifteen minutes. Your compensation package is conditional on your abiding by our confidentiality agreement. Is that understood? I really would prefer not to call in security – it always looks so cheap. Gentlemen,’ he said to the other two, ‘shall we leave him to his packing?’
Rajamani called after him, ‘When word of this gets out, this company will be finished – I’ll see to that.’
‘Yes, I’m sure.’
‘You said VIXAL could fly us all into a mountainside, and that’s exactly what it’s doing…’
Quarry put his arms around Ju-Long and van der Zyl and guided them out of the office ahead of him. He closed the door without looking back. He knew that the entire drama had been played out to an audience of quants, but that could not be helped. He felt quite cheerful; he always felt good after he’d fired someone: it was cathartic. He smiled at Rajamani’s assistant: a pretty girl; she would have to go too, unfortunately. Quarry took a pre- Christian view of these rituals: it was always best to bury the servants with the dead master in case he might require them in the next world.
‘I’m sorry about that,’ he said to Ju-Long and van der Zyl, ‘but at the end of the day we’re innovators in this shop, are we not, or we are nothing. And I’m afraid Gana is the kind of chap who’d have turned up on the quayside in 1492 and told Columbus he couldn’t set sail because of his negative risk assessment.’
Ju-Long said, with an asperity Quarry had not expected, ‘Risk was his responsibility, Hugo. You may have got rid of him, but you have not got rid of the problem.’
‘I appreciate that, LJ, and I know he was your friend.’ He put his hand on Ju-Long’s shoulder and gazed into his dark eyes. ‘But don’t forget that at this precise moment this company is about eighty million dollars richer than it was when we came in to work this morning.’ He gestured to the trading floor: the quants had all returned to their places; there was a semblance of normality. ‘The machine is still functioning, and frankly, until Alex tells us otherwise, I think we have to trust it. We have to assume VIXAL is seeing a pattern in events that we can’t discern. Come on – people are looking.’
They moved off, along the side of the trading floor, Quarry taking the lead. He was keen to get them away from the scene of Rajamani’s assassination. As he walked, he tried yet again to get Hoffmann on his mobile number; yet again he was put straight through to voicemail. This time he didn’t even bother to leave a message.
Van der Zyl said, ‘You know, I was thinking.’
‘What were you thinking, Piet?’
‘That VIXAL must have extrapolated a general market collapse.’
‘You don’t say.’
But van der Zyl missed the sarcasm. ‘Yes, because if you look at the stocks it’s shorting – what are they? Resorts and casinos, management consulting, food and household goods, all the others – these are just right across the board. They are not at all sector-specific.’
‘Then there is the short on the S and P,’ said Ju-Long, ‘and the out-of-the-money puts…’
‘And the Fear Index,’ added van der Zyl. ‘You know, a billion dollars of options on the Fear Index – my God!’
It certainly was a hell of a lot, thought Quarry. He came to a halt. In fact, it was more than a hell of a lot. Until that moment, in the general welter of data that had been thrown around, he had rather missed the significance of the size of that position. He stepped across to a vacant terminal, bent over the keyboard and quickly called up a chart of the VIX. Ju-Long and van der Zyl joined him. The graphic showed a gentle wave pattern in the value of the volatility index as it had fluctuated over the past two trading days, the line rising and falling inside a narrow range. However within the last ninety minutes it had definitely started trending upwards: from a base of around twenty-four points at the US opening, it had now climbed to almost twenty-seven. It was too early to say whether this marked a significant escalation in the level of fear in the market itself. Nevertheless, even if it didn’t, on a billion-dollar punt, they were looking at almost a hundred million in profit right there. Once again Quarry felt a cold tremble run down his back.
He pressed a switch and picked up the live audio feed from the pit of the S amp;P 500 in Chicago. It was a service they subscribed to. It gave them an immediate feel for the market you couldn’t always get from just the figures. ‘Guys,’ an American voice was saying, ‘the only buyer I have on my sheet here, guys, from about nine twenty-six on, is a Goldman buyer at fifty-one even two hundred and fifty times. Other than that, guys, every entry I have has been sell-side activity, guys. Merrill Lynch I had big-time seller. Pru Bache I had big-time seller, guys, all the way from fifty-nine to fifty-three. And then we saw Swiss Bank and Smith coming in big-time sellers-’
Quarry switched it off. He said, ‘LJ, why don’t you make a start on liquidating that two-point-five billion in T- bills, just in case we need to show some collateral tomorrow?’
‘Sure, Hugo.’ His eyes met Quarry’s. He had seen the significance of the movement in the VIX; so had van der Zyl.
‘We should try to talk to one another at least every half hour,’ said Quarry.
‘And Alex?’ said Ju-Long. ‘He ought to see this. He would be able to make some sense of it.’
‘I know Alex. He’ll be back, don’t you worry.’
The three men went their separate ways – like conspirators, thought Quarry.
