This is not the secret sauce, but probably an implementation of a set of standard well known pricing and risk models. That's still useful, and can be expensive to develop, so thanks Goldman.
Not true. You might make an argument that this is the effect of having them together in a market, but that's not their job:
- Market maker: hang around the market offering to trade with anyone (pref retail) at a spread. Doesn't care whether TSLA is gonna be able to make all those Model 3s.
- Pension fund: make sure they can pay the liabilities that are coming due. If that can be locked in, happy to pay a bit more than fair value to do so.
- Hedge fund: make absolute returns. Buy before it goes up, sell before it goes down. Whatever form of voodoo (or skill) fulfills this is fine. This doesn't have to mean finding the right price (could just mean you guess which way it's going), though of course often it is part of the objective.
- Broker: finds people on both sides of a trade. Doesn't care terribly much except to create excitement.
- Banks: lend money/securities and offer services to all of the above. Create research to make people trade. Securitise stuff so people can trade it. Often do a bit of everything.
Source: used to run hedge funds.
Im a programmer, but on the side have made on average 150% profit in share dealing over the passed 5 years, but more importantly, a much higher return in other assets to 2 orders of magnitude higher.
My question is - would experience / gains like this - if i had proof etc - get me an interview in a fund as some type of well paid (6 figure atleast) analyst?
That being said, most of your definitions are still dependent on competitively pricing securities. A market maker who can't calculate reasonable theos won't be a market maker for long.
Hedge Fund: Convince customers to invest their money in the fund. Extract as much of it as possible through fees. Doesn't care much where the market goes, charge a fee either way, a bit more if it goes up.
At the time of Aleynikov's case, Goldman was routinely at the top of the NYSE rankings with regard to programmatic trading volume.
We're reading about how GS "will" open source some software on WSJ, it would be better to just see a blog announcement with a link to the repository.
Didn't they like completely throw the book at him by charging him under that completely insane law the Computer Fraud Act?
In particular, the claim that he was "open sourcing software he developed in a personal side project" turned out to be a self-serving fabrication. From the Second Circuit's opinion:
> Aleynikov’s last day at Goldman was June 5, 2009. At approximately 5:20 p.m., just before his going-away party, Aleynikov encrypted and uploaded to a server in Germany more than 500,000 lines of source code for Goldman’s HFT system, including code for a substantial part of the infrastructure, and some of the algorithms and market data connectivity programs.
> Aleynikov also transferred some open source software licensed for use by the public that was mixed in with Goldman's proprietary code. However, a substantially greater number of the uploaded files contained proprietary code than had open source software.
It's the high-tech version of a man accused of murdering his wife giving the excuse "I swear, I thought I was shooting at a burglar that had broken into our bedroom!"
Note also that while Aleynikov's conviction was vacated by the Second Circuit, it was because of a loophole. The Second Circuit decided that stolen source code did not count as a "stolen good" under the Economic Espionage Act. (Congress corrected that loophole the same year.)
GS benefiting from open-source doesn't imply malicious intent.
- it increases its brand awareness/respect for technical customers, potential job candidates, and business partners
- it can teach finance and CS students about basic algorithms used in the industry. In some industries, it is healthier for a company's technical edge to not be so far ahead of competitors.
- the open-source """community""" (whatever that is) can find bugs and extend the software for the benefit of GS. I highly doubt this is a motive, but it's a possibility/daydream.
https://arstechnica.com/tech-policy/2009/07/goldmans-secret-...
And this is why people are saying to exercise caution around this stuff!
You used the word "what" where we would normally use the word "that".
I've heard this done during speech numerous times from everyone ranging from fluent native speakers to learning nonnative speakers. Was there a specific reason you did it here?
"Aug. 12, 2015, 12:33 Goldman Sachs is going the way of Google and Facebook. The investment bank is giving away some of its trading technology to clients through open-source software, according to The Wall Street Journal...."
Am I missing something?
This might be just PR, in which case the code could be useful for some. However, they may be doing this is because they found something that they can exploit if other people are using this code. It might be nothing particularly bad for a given user, but if a big block of investors begin using code Goldman Sachs knows intimately, the market may suddenly start doing stuff that just happens to fall to Goldman Sach's advantage.
Not unlike the magic numbers the NSA suggested for various encryption schemes.
this can be an attempt at the same for the new generation. if your algo is making money and it can benefit from a mass adoption of the same strategy (or more likely they have a secret tweaked one that takes that more into account) why wouldn't they offer it in the open?
> In business, "vice president" refers to hierarchical position that ranges from extremely senior positions directly reporting to C-level executives (in non-financial companies), to junior non-management positions with four to 10 years of experience (in financial companies).
...
> In brokerage firms, investment banks and other financial companies, "vice president" is a seniority rank rather than denoting an actual managerial position within the company. It is a relatively junior position, usually does not denote managerial responsibilities and companies have a large number of vice presidents, perhaps as an inexpensive way for a company to recognize employees, or perhaps because of delayering when an employee can't be moved higher in the organization but still deserves recognition. In most cases, the title merely implies that someone is in a medium-seniority individual contributor role.
I work in the same industry, and my boss is a vice president (and had been a vice president for years despite becoming a manager only last year); his boss is a vice president; his boss is a managing director; his boss is a managing director; her boss is the CTO; his bosses own the company. I'm at roughly a level 4 in Google terms, and at my next promotion I can apply for VP and at the one after that I must apply for VP, regardless of whether I stay on the IC track or move to the manager track. So that should get you an idea of what "VP" means.
All of this was new to me when joining, though, and it would be nice to have it more publicly known.
Edit: After RTFA, it seems to be 2.5 things: - Crowdsourcing ideas while getting everyone to conform to their platforms - Image improvement to appear innovative - Speculating: monetization of old code that doesn't actually work anymore
He told me that according to his friend who works there and got him the interview, none of them are comfortable advertising that. They all choose to put "Sr. Software Engineer" on LinkedIn instead of their actual titles because nobody outside finance would understand why they're a VP.
The lowest level managing directors typically have several additional managing directors between them and the C level executives. In other words, you can be in charge of a 15 person unit and be called a managing director or you can be in charge of an entire division of 500 people and make as much as some fortune 500 CEOs and be called a managing director. Generally, your clients are fairly sophisticated and know exactly where you are in the totem pole.
In addition to just being a rung on the ladder, the VP title often also means that you are a corporate officer, who can enter into agreements on behalf of the company.
Often called SMD (Senior) or EMD (Executive)
I took 'secret sauce' in GP's comment to mean 'profitable strategies'. Don't confuse volume with profitability. It's conceivable that a BB would deliberately lose money in some activities to have clients give them other, more profitable flow/business.
N.B, Lapdance not gauranteed
No, the MM doesn't care if TSLA is overpriced. He just sees where everyone is and makes a market roughly there.
> You can't provide quotes if you don't have something to quote around.
But you don't have to quote around the actual value of the item. That's the point.
You can of course also learn some things about where to market is going in the course of this business, and many desks are able to piggy back on some flow information for their advantage.
* Advice and information that could keep a programmer out of jail.
* There's the description of Aleynikov's jailhouse enlightenment -- there is no other word for it -- e.g. what his lawyer says:
“Every time I would come to visit him in jail, I would leave energized by him,” she says. “He radiated so much energy and positive emotions that it was like therapy for me, to visit him. His eyes opened to how the world really is. And he started talking to people. For the first time! He would say: People in jail have the best stories. He could have considered himself a tragedy. And he didn’t.”
* There's the discussion of how no one involved (except Aleynikov) actually understood anything about the case and how Aleynikov's attempts to help clarify things were used against him.
* And, then, there's the piece de resistance, where Michael Lewis convenes a jury of cynical programmers -- i.e. some people who actually have a clue -- to meet Aleynikov and judge his actions (spoiler: their cynicism about the case is replaced with incredulity when they talk to him and realize he didn't care about Goldman Sach's "secret sauce" trading algorithms, etc.).
(Also, Lewis discusses his article in a Q&A in Vanity Fair [1] where he gets to talk about his own reaction to it all).
Again, well worth your time.
[0] https://www.vanityfair.com/news/2013/09/michael-lewis-goldma...
[1] https://www.vanityfair.com/news/2013/08/michael-lewis-on-gol...
Read the extensive rebuttal for all the details:
https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-...
Last I heard, he was given time served, but the founding partner of the firm - who was his primary legal counsel in the case - was trying to get that conviction stricken from his record as well.
https://www.davispolk.com/files/DavisPolk_Final_Volcker_Rule...
And you need to know what machinery you'll need too. Capital requirements, counterparty agreements, access to stock lending, cost requirements, IT requirements, everything.
Some of the newer shops say you can keep your own IP. Haven't checked whether it's true, but most people I know are sceptical.
Say I set up a fund holding a low cost s&p500 index ETF, but at the end of each year sold naked puts with a ~1/25 risk of ruin to earn ~4% return. Therefore my fund consistently makes 4% over the market index, except for 1/25 years when it explodes and loses everything. Because the volatility is low, my sharpe ratio is good (until it explodes), correct?
Assuming it can stay in business >10-15 years won't I be a billionaire hedge fund manager by then and then change to a low risk strategy that only makes 1-2% more than market index with very low risk of ruin and just let my investors lose interest and quit the fund over the next decade while I continue to earn fees from them?
Anything that's both simple and mechanical is gonna have problems attracting investment. The guys you're talking to are gonna have problems justifying giving you 2/20 for buying a fund and selling options.
Or should. I've met a lot of investors who didn't ask the right questions.
Regarding the Sharpe, if they know what they're doing they're not just using the textbook version either. There's a paper by Andrew Lo about it, well worth a read, not terribly complex math.
[0] Granted, that's a huge "if".
It was mostly a gut feeling, after lots and lots of research.
My question basically is, if I show I have been really good in the past - without a specific model - is there anyway I would be taken seriously.
Thanks
Some markets can absorb an enormous amount of volume, such as the FOREX market.
Now, when you start making good trades in a "big" market, intelligent players can mimic / play off of them, so it is hard to prove in that regard.
At a minimum though, you could prove that it works on assets that are not volume-dependent.
Either way, it's insignificant and you're actually losing money. The stock of all the big companies went up tremendously in the past 5 years. Anybody who invested in large US equities made just as much if not more.
https://www.researchgate.net/publication/228139699_The_Stati...
Do hedge fund investors keep an eye on whether you do what you say? How did Bernie Madoff go for so long if that's the case?
Of course the mechanism is simple and mechanical, but that isn't how you'd market it to investors.
I'll go read the Lo paper...
Madoff was the cause of all the due diligence, though I'd say Europe was a bit different from the US at the time.