Introduction

In what many have described as a difficult trading year, Risk magazine recognises those institutions that have responded to market conditions by structuring solutions that have best met the needs of their clients. By Nick Sawyer, Christopher Jeffery, Navroz Patel, Rachel Wolcott, Alexander Campbell, Gareth Gore, Jayne Jung, Mark Pengelly, Anna Gordon-Walker and Clive Davidson.

Last year was not easy for the derivatives markets. Credit spreads continued to grind tighter, yield curves flattened unrelentingly, while a mid-year spike in equity volatility caught some of the largest hedge funds and proprietary trading desks off guard. And, of course, there were the $6 billion losses at Greenwich-based hedge fund Amaranth Advisors in September - which once again put hedge fund regulation at the top of the agenda for politicians and regulators on both sides of the Atlantic.

Yet there were still plenty of opportunities. In the credit market, the top dealers were able to design products aimed at addressing investor concerns about tight spreads by adding new features, increasing flexibility and mixing technology from cash and synthetic collateralised debt obligations.

In interest rate derivatives, buyers of 2005's hottest product - the constant maturity swap steepener - faced escalating mark-to-market losses as yield curves approached inversion. This prompted some banks to proactively approach their clients to offer advice and suggest restructuring options. And while some dealers say demand for exotic interest rate structured products dropped off last year, there were still plenty of opportunities for firms able to exploit investor demand for alpha generation. In particular, structured products driven by rules-based, quantitative trading models have proved popular, with a variety of strategies previously the preserve of the hedge fund industry launched in note form.

Elsewhere, the boom in mergers and acquisitions has been a major contributor to investment banks' revenues. It has also spawned a host of derivatives and risk management solutions. Specifically, the volume of deal-contingent swaps - which allow acquiring companies to hedge the interest rate and currency exposures that would arise from the financing of an acquisition, but terminates if the deal falls through - has surged.

Even the Amaranth collapse generated opportunities - specifically for JP Morgan and Chicago-based hedge fund manager Citadel Investment Group, which won the bidding to acquire Amaranth's mammoth portfolio. This transaction was instrumental in JP Morgan winning Risk's Energy Derivatives House of the Year award.

These awards recognise best practice and innovation in the derivatives and risk management industries globally. The winners are those that best responded to their clients' needs over the past 12 months. A Risk editorial panel decided on the winners over a three-month judging process from September to December. Candidates were asked to submit information on their business in each of the product categories over the preceding 12 months, and those firms or individuals on the shortlist then underwent a series of interviews. Risk then performed a lengthy due diligence process.

A number of factors were considered in the final decisions, including innovation, infrastructure, organisation, risk management, post-sales service and end-user feedback.

THE ROLL OF HONOUR

• Derivatives house of the year - Merrill Lynch
• Lifetime achievement award - Gerald Corrigan
• Interest rate derivatives house of the year - Goldman Sachs
• Credit derivatives house of the year - Lehman Brothers
• Equity derivatives house of the year - BNP Paribas
• Energy derivatives house of the year - JP Morgan
• Commodity derivatives house of the year - Morgan Stanley
• Currency derivatives house of the year - Royal Bank of Scotland
• Inflation derivatives house of the year - Barclays Capital
• Structured products house of the year - Barclays Capital
• Deal of the year - Constant proportion debt obligation, ABN Amro
• Bank risk manager of the year - Robert Berry, Goldman Sachs
• Credit portfolio manager of the year - UniCredit Markets and Investment Banking
• CDO manager of the year - Solent Capital
• Hedge fund of the year - DE Shaw Group
• Insurance risk manager of the year - Swiss Re
• Pension risk manager of the year - J Sainsbury
• Municipal risk manager of the year - Florida Municipal Power Agency
• Sovereign risk manager of the year - The New Zealand Debt Management Office
• Corporate risk manager of the year - Hewlett-Packard
• Derivatives research house of the year - JP Morgan
• Quants of the year - Paul Glasserman and Michael Giles
• Software product of the year - SAS Risk Intelligence
• Technology platform of the year - Trade Information Warehouse, DTCC
• In-house system of the year - CreditDelta, UBS
• Exchange of the year - Chicago Mercantile Exchange