NEW YORK--(Business Wire)--
Goldman Sachs Electronic Trading (GSET) announced today the release of several
significant enhancements to the Goldman Sachs Shortfall Model (GSSM). The GSSM
generates expected shortfall numbers, which are estimates for the average change
in stock price a trader may create by executing an order. Two major enhancements
to the GSSM include:
* improvements to the US equities model
* calibration of that new model specifically for US exchange traded funds
(ETFs).
The key enhancement to the US equities model is the removal of market
capitalization buckets. Stocks within the GSSM are no longer classified into
small, mid, and large-cap categories, which can be extremely fluid in times of
increased volatility. Instead, the model has been enriched with a more flexible
functional form that captures liquidity differences across the market
capitalization spectrum and allows the model to better predict trading costs.
The addition of an ETF-specific version of the enhanced shortfall model allows
for better transaction cost prediction when trading ETFs. While the old model
included ETFs as part of the estimation universe for equities, ETF model
coefficients are now estimated separately based on a large sample of executed
orders for ETFs only.
"While we continuously monitor the predictive ability of our shortfall model,
the significant volatility and dramatically changing US equity landscape of the
past year underscores the value of these changes, which we researched over an
extensive period of time," said Ingrid Tierens, Managing Director and head of
equity execution strategies, GSET. "With this new model, clients benefit from an
enhanced ability to predict shortfall estimates, not only for single-stock and
portfolio trades, but also for ETFs, which have seen significant growth over the
past few years."
The GSSM is based on Goldman Sachs` own executed orders data, rather than
publicly available tick data, and is re-estimated frequently to reflect recent
market conditions and uses factor inputs that are updated on a daily basis. Both
customers of GSET, utilizing its electronic tools and services, and Goldman
Sachs traders utilize the GSSM.
Goldman Sachs customers can access the GSSM in a variety of ways. The model is
utilized for pre-trade analytics as well as daily, monthly, and quarterly
post-trade reports. The GSSM is fully integrated in two GSET algorithms, OptimIS
and Port X. The GSET Strategies team also utilizes the model in equity execution
and portfolio optimization analyses. Clients trading electronically will be able
to access the model in REDIPlus version 9.1 (to be released in September, 2009),
or via web-based reports. In addition, the model is fully integrated with Axioma
Portfolio OptimizerTM, a third-party optimization and portfolio construction
tool.
About Goldman Sachs Electronic Trading
Goldman Sachs Execution & Clearing, L.P, through its GSET offering, provides
clients with the necessary tools to manage their trades from start to finish,
from pre-trade analytics to post-trade analysis. Clients access our products via
REDIPlus®, our top-ranked EMS platform, or via FIX. Customers can seek liquidity
using our suite of multi-asset algorithms, route to optimal destinations using
our SIGMA smart router, and take advantage of non-displayed liquidity through
our SIGMA and SIGMA X non-displayed liquidity suite. Along with providing
clients access to global equity markets, we also offer FX, Futures, and Options
across North America, Europe, and Asia.
The Goldman Sachs Group, Inc. is a leading global financial services firm
providing investment banking, securities and investment management services to a
substantial and diversified client base that includes corporations, financial
institutions, governments and high-net-worth individuals. Founded in 1869, the
firm is headquartered in New York and maintains offices in London, Frankfurt,
Tokyo, Hong Kong and other major financial centers around the world.
http://www.reuters.com/article/pressRelease/idUS100526+20-Jul-2009+BW20090720
Goldman Sachs Electronic Trading (GSET) announced today the release of several
significant enhancements to the Goldman Sachs Shortfall Model (GSSM). The GSSM
generates expected shortfall numbers, which are estimates for the average change
in stock price a trader may create by executing an order. Two major enhancements
to the GSSM include:
* improvements to the US equities model
* calibration of that new model specifically for US exchange traded funds
(ETFs).
The key enhancement to the US equities model is the removal of market
capitalization buckets. Stocks within the GSSM are no longer classified into
small, mid, and large-cap categories, which can be extremely fluid in times of
increased volatility. Instead, the model has been enriched with a more flexible
functional form that captures liquidity differences across the market
capitalization spectrum and allows the model to better predict trading costs.
The addition of an ETF-specific version of the enhanced shortfall model allows
for better transaction cost prediction when trading ETFs. While the old model
included ETFs as part of the estimation universe for equities, ETF model
coefficients are now estimated separately based on a large sample of executed
orders for ETFs only.
"While we continuously monitor the predictive ability of our shortfall model,
the significant volatility and dramatically changing US equity landscape of the
past year underscores the value of these changes, which we researched over an
extensive period of time," said Ingrid Tierens, Managing Director and head of
equity execution strategies, GSET. "With this new model, clients benefit from an
enhanced ability to predict shortfall estimates, not only for single-stock and
portfolio trades, but also for ETFs, which have seen significant growth over the
past few years."
The GSSM is based on Goldman Sachs` own executed orders data, rather than
publicly available tick data, and is re-estimated frequently to reflect recent
market conditions and uses factor inputs that are updated on a daily basis. Both
customers of GSET, utilizing its electronic tools and services, and Goldman
Sachs traders utilize the GSSM.
Goldman Sachs customers can access the GSSM in a variety of ways. The model is
utilized for pre-trade analytics as well as daily, monthly, and quarterly
post-trade reports. The GSSM is fully integrated in two GSET algorithms, OptimIS
and Port X. The GSET Strategies team also utilizes the model in equity execution
and portfolio optimization analyses. Clients trading electronically will be able
to access the model in REDIPlus version 9.1 (to be released in September, 2009),
or via web-based reports. In addition, the model is fully integrated with Axioma
Portfolio OptimizerTM, a third-party optimization and portfolio construction
tool.
About Goldman Sachs Electronic Trading
Goldman Sachs Execution & Clearing, L.P, through its GSET offering, provides
clients with the necessary tools to manage their trades from start to finish,
from pre-trade analytics to post-trade analysis. Clients access our products via
REDIPlus®, our top-ranked EMS platform, or via FIX. Customers can seek liquidity
using our suite of multi-asset algorithms, route to optimal destinations using
our SIGMA smart router, and take advantage of non-displayed liquidity through
our SIGMA and SIGMA X non-displayed liquidity suite. Along with providing
clients access to global equity markets, we also offer FX, Futures, and Options
across North America, Europe, and Asia.
The Goldman Sachs Group, Inc. is a leading global financial services firm
providing investment banking, securities and investment management services to a
substantial and diversified client base that includes corporations, financial
institutions, governments and high-net-worth individuals. Founded in 1869, the
firm is headquartered in New York and maintains offices in London, Frankfurt,
Tokyo, Hong Kong and other major financial centers around the world.
http://www.reuters.com/article/pressRelease/idUS100526+20-Jul-2009+BW20090720