If you want to understand Goldman Sachs risk management procedures: a good overview is found in "GSEC ( Goldman Sachs Execution and Clearing ) Risk Management Methods". Unfortunately - for obvious reasons - I can not publish details on topics as risk methodology, stress test scenarios by asset classes, stress test levels used for all equity products ( individual stocks, equity index products, commodity futures prodcuts), scale volatilities, implied volatility skews, theta or decay exposures, rho exposures, GSEC Market Stress Test Procedures:fixed Income (FI) Derivative Portfolios Using Exchange Traded Products in Multiple Countries etc. If you would have access to this kind of information from your customers, it´s easy to assume that you might profit in a way or the other...
Contrary to common perception, failure is actually the standard in America now vs. success. All the proof you need. http://www.theonion.com/content/news/failure_now_an_option
Goldman is the best in the biz as far as risk management goes no doubt.... but the idea information was communicated from one side of the chinese wall to other is borderline illegal. And while that wall was initially established to keep IB/research/trading separate, apparently it does not apply to other areas within the bank. Just ask Brian Hunter and Amaranth how this feels, although his own megalomania was as responsible as any leaks coming from his prime broker.
I'm not blaming the PB, however the point of the analogy is that anyone with inside knowledge of another players position can easily exploit it for their own gains. The bear-raid led by Centaurus and T Boone Pickens among others would most probably have not been nearly as successful had they not known about Hunter's huge, over-leveraged position. The fact is that Hunter was an idiot for boasting about it, but the extent of the leak also occurred at his PB. That is why he got pwned. Same way Goldman "owned" the street this year.
Bingo! I oft wonder if Timber Hill is smart enough to monitor IB's positions during the day. An absolute wealth of contrary sentiment.....
i didn't read all the posts in this thrd so if im repeating,forgive me,i hrd that GS is the owner of all electronic trading ,so they have inside info on oversold overbought stats at all times,sounds like the FCC and SEC stuck there head in the sand again
What I found most amusing about this article was that it laid bare all the gushing praise about Goldman after they reported such good earnings while all the other brokers were taking huge charges. PM after PM who owned or admired Goldman fawned all over about the quality and how they were different, yada yada yada, when, in effect, it was a few guys making a decision to cover the asses of hundreds of others.