2010 Awards for excellence: Best Global equity derivatives house
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2010 Awards for excellence: Best Global equity derivatives house

The French bank swam against the tide – and won – with products such as equity volatility swaps, while maintaining a process involving transparency, suitability and risk control.

Awards for Excellence 2010
Best Global equity derivatives house: BNP Paribas
Also nominated: Société Générale and JPMorgan

As equity markets reeled at the height of the European sovereign crisis in May, volatility spiked through the roof. Ten-day volatility on the Dow Jones Eurostoxx 50 index rocketed from a March low of 10.47 to a peak of 71.71 on May 14. Several media reports suggested that large losses had been incurred at banks and hedge funds, which had been short variance and correlation products in the run-up to those huge market moves. It had shades of 2008. Had no one learnt anything?

"After the crisis many clients realized that they’d been buying things that were a bit too leveraged, a bit too exotic and not that transparent," says Bertrand Delarue, global head of flow product engineering at BNP Paribas. Clearly, that message hasn’t quite got through – markets find leveraged bets a hard drug to kick. As Delarue explains, shorting variance swaps on single stocks in the current market is a bet on the markets calming down. "That’s a big bet to make; variance is a bull-market product, on single stocks, it’s a sucker’s game."

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