One Year Ago In Derivatives Week

Lehman Brothers began pricing certain credit default swaps with a fixed coupon and the new way was finding some takers. The firm booked around 10-15% of its homebuilder CDS flow trades in this format over a period of three weeks, and was calling on others to follow suit. [In April, North American corporate single name CDS started trading with fixed coupons of either 100 or 500 basis points and then an upfront payment reflecting the risk of the credit (DW Online, 4/3). In June, European dealers decided on four fixed coupons--25, 100, 500, or 1,000 bps--with existing trades re-couponed on strikes of 300 or 750 bps (DW Online, 6/8).]