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And the equity derivatives house of the year is…

Yes, you guessed it: Société Générale.Awarded just this month by Risk magazine, SocGen bagged the gong for equity derivatives house of the year. While credit made headlines, said the mag, equity markets also had a rough ride, with the rise in correlation and volatility causing pain for some dealers.Christope Mianne

With one of the largest exotics books on the Street, one would imagine that Société Générale Corporate and Investment Banking (SG CIB) 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, SG CIB’s head of market activities, covering equity, derivatives, fixed income, currency and commodities in Paris.

“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.

They were so busy managing the book for forthcoming volatility, that they failed to notice a trader building up “massive fraudulent directional positions,” resulting in the loss of €5bn.

This entry was posted by Helen Thomas on Thursday, January 24th, 2008 at 8:34 and is filed under Capital markets. Tagged with . You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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Comments

  1. Jan 25   17:03 Posted by Peter Collins [report]

    Sorry Anonymous, 10.21 If FT Mandate gave awards, I am sure SG may have been a contender, but we don’t.

    Regards

    Peter Collins
    Publisher, FT Mandate

  2. Jan 24   20:35 Posted by Anonymous [report]

    Obviously Risk management was a major issue here but it would have been impossible to predict such a massive fraud without being inside the bank - after all this guy was doing his best to cover his steps!

  3. Jan 24   16:32 Posted by Anonymous [report]

    Just to correct Anonymous’s post earlier, IFR’s equity derivatives house of the year for the year just gone was Deutsche.

  4. Jan 24   12:36 Posted by CMCS [report]

    Ironical that Daniel Bouton chaired the working group which produced the French report “Promoting Better Corporate Governance in Listed Companies”.

    Extract: “Such a (free market) system cannot tolerate fraud. If fraudulent acts are committed, they must be punished. Most legal systems provide for severe criminal penalties for such acts, and theseshould be fully applied. French law is particularly well armed in this area, with criminal offences having been created to deal with such abuses as misappropriation of corporate
    assets, filing of fraudulent financial statements or spreading of false information. However, it would plainly be illusory to imagine that increasing the number or severity of criminal sanctions can offer effective protection against the main risks, which lie in strategic errors or incompetent management.”

  5. Jan 24   11:16 Posted by Nick Sawyer, Editor Risk magazine [report]

    Risk magazine’s equity derivatives house of the year award was given on the basis of SG’s innovation in derivatives in 2007 – they launched a number of products first, including a structure linked to the implied volatility smile on a basket of stocks. SG’s losses were due to fraud, committed by a single person.
    The article can be read by clicking on: http://www.risk.net/public/showPage.html?page=685494

  6. Jan 24   10:21 Posted by Anonymous [report]

    Funny but I think that the following publications have given them an award recently

    IFR
    Euromoney
    FT Madate (owned by FT)
    The Banker (owned by FT)

  7. Jan 24   9:43 Posted by Alea | Huge “Fraud” at SocGen : $7.1 billion Lost [report]

    […] Added : You can make that up: Equity Derivatives House of the Year - Société Générale […]

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