[cellis]

Ahem. Please don't attribute Goldman's success to trading. Goldman Sachs recent "success" is largely due to them adroitly navigating the political waters of the bailout, without which i suspect they would be in serious trouble.

As for machine trading or stat-arb, high freq, whatever...i don't think it is any better than a random walk. Risk was (is?) just being hidden somewhere and lied about.

[eru]

Not necessarily. E.g. arbitrage is really risk-free.

[cellis]

Frictionless arbitrage?

[eru]

No. You need to find enough of an arbitrage opportunity to overcome the friction. But once you found it, it's a risk-free profit. (You can't do too complex an atomic transaction on the financial markets; but most arbitrage deals take much less than a day --- even less than a few minutes, so your window of exposure is quite short.)