Related discussion by Matt Levine: https://www.bloomberg.com/view/articles/2016-10-19/bond-trad...
How One Goldman Sachs Trader Made More Than $100M
51–60 of 120 posts
Re: How One Goldman Sachs Trader Made More Than $100M
#52Earlier quoted context omitted.
Click the "web" link under the article title, then click on the first result.
That doesn't always work. Source: I'm on mobile right now, it doesn't work. Country of origin and/or incognito mode could be a factor.
A lot of sites are pretty bad on mobile, should we disqualify all sites that are bad on mobile? When I browse HN on mobile I lower my expectations.
Re: How One Goldman Sachs Trader Made More Than $100M
#53Earlier quoted context omitted.
Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…
If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits. Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely. This is already happening today to some extent: [1]…
Volatility can be highly valuable in the long term to keep markets honest. Without that there is a tendency to add leverage until something far more significant breaks down.
Re: How One Goldman Sachs Trader Made More Than $100M
#54Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…
Surprised their VAR (which is a crap way to measure risk) is not even halved in relation to before the crisis. People were definitely chucking it about back then, and the mood these days is like a morgue.
If you get better at measuring risk, VAR can go up. For instance, if your models assume that asset classes act in an uncorrelated manner, then VAR may be very low. You improve the model to capture correlation, and VAR for the same exact assets goes up.
Net - they could have a much less riskier position, but improvements in their risk modeling might not reflect it in VAR.
VAR can be good in conjunction with other metrics, but it's pretty awful as a standalone because it doesn't measure the severity of very rare tail events.
Re: How One Goldman Sachs Trader Made More Than $100M
#55Earlier quoted context omitted.
Really now? Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. The settlement, over the sale of mortgage-backed securities from 2005 to 2007, was first announced in January. “This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew tha…
Your quote is about honesty. OPs quote was about unhedged rusk. They have little to no relation. You can be both a dishonest trader AND a smart one.
Actually the comment I was responding to was about "running a tight shop" -- which is about operational integrity in general (not just on the matter of unhedged risk).
In the, you know, "would you buy a used car from these guys?" sense.
Re: How One Goldman Sachs Trader Made More Than $100M
#56Earlier quoted context omitted.
If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits. Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely. This is already happening today to some extent: [1]…
Volatility can be highly valuable in the long term to keep markets honest. Without that there is a tendency to add leverage until something far more significant breaks down.
Generally not this sort of volatility though: https://en.wikipedia.org/wiki/2010_Flash_Crash
Re: How One Goldman Sachs Trader Made More Than $100M
#57Earlier quoted context omitted.
Really now? Goldman Sachs will pay $5.06bn for its role in the 2008 financial crisis, the US Department of Justice said on Monday. The settlement, over the sale of mortgage-backed securities from 2005 to 2007, was first announced in January. “This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew tha…
They made money and later payed a fine , how is this disputes a statement that GS does not take large unhedged positions?
The point is that the assertion you attempted to make in favor of the idea that GS just of course wouldn't take large unhedged positions -- "they run a tight shop" -- just doesn't have a great deal of solid backing.
Re: How One Goldman Sachs Trader Made More Than $100M
#58Earlier quoted context omitted.
Your quote is about honesty. OPs quote was about unhedged rusk. They have little to no relation. You can be both a dishonest trader AND a smart one.
Actually the comment I was responding to was about "running a tight shop" -- which is about operational integrity in general (not just on the matter of unhedged risk). In the, you know, "would you buy a used car from these guys?" sense.
Operational integrity for investment bank is to a very significant degree risk management. Integrity as in having control over something not in a moral sense. In the case you referenced I'd rather see GS's counterparties taking more blame. The whole we are poor guys running multi-billion dollar funds and charging millions in fees didn't do due diligence and want to blame someone else thing is pure BS.
Re: How One Goldman Sachs Trader Made More Than $100M
#59Earlier quoted context omitted.
They made money and later payed a fine , how is this disputes a statement that GS does not take large unhedged positions?
The point is that the assertion you attempted to make in favor of the idea that GS just of course wouldn't take large unhedged positions -- "they run a tight shop" -- just doesn't have a great deal of solid backing.
If you provide an example of a large unhedged position that GS has on the books I'll totally believe you.
Re: How One Goldman Sachs Trader Made More Than $100M
#60Earlier quoted context omitted.
The point is that the assertion you attempted to make in favor of the idea that GS just of course wouldn't take large unhedged positions -- "they run a tight shop" -- just doesn't have a great deal of solid backing.
If you provide an example of a large unhedged position that GS has on the books I'll totally believe you.
You can believe whatever you want. Based on my own research over the years -- and personal dealings with people who have worked there -- I tend not to trust that "shop".