Derivatives House: Merrill Lynch

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Derivatives House: Merrill Lynch

Awards for Excellence 1997


While many other derivatives houses have stuck to tried and tested derivatives products, Merrill has been experimenting with a wide range of third-generation products. At the same time it is attempting to improve the execution of such first-generation products as plain-vanilla swaps and options. Adding Merrill's very large distribution network to its track record of derivatives innovation and you are on to a winner.

Among the products Merrill has introduced this year is structured financing. One such deal, which Merrill co-led, was for the Kingdom of Denmark. Investors were able to choose principal repayment in one of four currencies and the deal was placed with both institutional and retail investors.

Another winner for Merrill was inflation-linked structures. It was the first bank to execute a 10-year inflation swap, and pioneered trader options, an innovative product that at expiration allows the investor to receive any positive P&L from trading and has no downside except for the initial option premium paid.

Merrill has also moved into emerging market and credit derivatives. One deal included a credit-spread-linked financing that allowed the issuer to reduce its financing costs by buying its own credit spread.


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