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February 20, 2008

Equity Derivatives House of the Year! (A "Couldn't Resist" Post)

From Risk magazine's profile of the winner of its Equity Derivatives House of the Year-2008 (announced in January 2008).
Newspaper headlines in August were dominated by the credit markets - the rise in US subprime mortgage delinquencies, the nasty losses reported by banks, hedge funds and structured investment vehicles, and the sharp squeeze in liquidity. However, the equity markets also had a rough ride. Most notable was the plight of quantitative hedge fund strategies, many of which racked up sizeable mark-to-market losses in just a few days in early August. But the sharp rise in correlation and volatility also caused some pain for dealers.

With one of the largest exotics books on the Street, one would imagine that (the winning firm's) Corporate and Investment Banking would be licking its wounds and coping with hundreds of millions of euros in losses. There was some impact, but the losses have been relatively minor and entirely manageable, says Christophe Mianne, (the winning firm's) head of market activities, covering equity, derivatives, fixed income, currency and commodities.

"We managed the existing book very well because we decided some time before the crisis to be long volatility and be less sensitive to correlation, so the losses were minimal. We suffered on our statistical arbitrage trading activity, but that was just for one month, and minimal compared to some hedge funds or other banks. Overall, our trading activities will be approximately flat compared to last year, which is a good performance," remarks Mianne.

Any guesses on the winning firm?
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Société Générale!!! Yes, the same Société Générale of Jérôme Kerviel fame.

Hat tip: Marc Andreessen who categorizes this under "Great moments in journalism" (Ouch!)

Thanks also to Marc for pointing to The Daily Mash's hilarious "revelation" :
Friends of rogue trader Jerome Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30 hour week.

Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch.

..."But Jerome was tied to that desk. One day I came back to the office at 3pm because I had forgotten my stupid little hat, and there he was, fast asleep on the photocopier.


Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.