what are examples of companies who were able to leverage some little-known but true insight about the world to strike numerous one-sided deals?
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there was a terrific Risk article about Libor vs OIS discounting that GS figured out years before everyone else and made a fortune on
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I know Derman came up with some smart stuff. And I forget which MIT finance prof spent a summer working at Goldman and made them $50m, back when that was real money.
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They definitely had a uniquely capable software system for it, even if the math wasn’t unique to them.
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Yes. You can also extrapolate that to multiple other corners of finance where [insert big bank name here] paid [inset copious amount of money here] to a team to maximize exploitation of [insert financial market idiosyncrasy here] What a business model.
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There’s adverse selection though! A trader at Shearson-Lehman found a way to go long duration without any risk—he bought long-dated CDs, which their risk system treated as bank deposits and didn’t mark to market. Joe Jett did something similar at Kidder.
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