Calyon is in the final stages of launching an innovative market value credit platform, which it aims to roll out to institutional and retail clients. Loic Fery, managing director and global head of structured credit and CDO structuring at Calyon in London, said the instruments will use a capital protection technique known as constant proportion portfolio insurance to provide a guarantee and will offer leveraged exposure to the Dow Jones iTraxx credit indices. CPPI is frequently used in equity derivatives, but is new to credit.
"Now that the credit indices are liquid and there is a closing every day, we are able to construct market value products around them," explained Fery.
Fery hopes to place several hundred million euros of this series of products, dubbed Credit Sail, in the coming months. Calyon will offer the investment products in various currencies and with different payouts.
The series is designed for both the institutional market, including pension funds and insurance companies, and the retail market, noted Fery. Bankers have traditionally found it hard to place retail products with embedded credit derivatives because of the difficulty in explaining credit events. Fery, however, said this product doesn't have any credit events because it is tracking the market value of the indices rather than buying or selling protection.