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Derivatives

Korean De-Regulation To Boost Product Scope

Doors are opening for the Korean derivatives market with a wider range of products expected to be permitted and anticipation for an increase in credit-default swap trading on the back of market de-regulation.

Doors are opening for the Korean derivatives market with a wider range of products expected to be permitted and anticipation for an increase in credit-default swap trading on the back of market de-regulation. The Ministry of Finance and Economy recently announced it will remove restrictions on market participants and allow a wider scope of products.

For instance, credit derivatives end users such as insurers and investment trust companies will soon be able to use credit derivatives for hedging books without prior approval. In the last few years insurance companies in Korea have been major investors in credit products, but have required approval for buying or hedging such instruments on a case-by-case basis. "This should bring more demand for CDS trading," said Man-Ho Yoon, general manager in the financial engineering department at Korea Development Bank in Seoul. The scope of fund-linked products is also being widened, with for instance officials at Barclays Capital anticipating a boom in CPPI structures for the retail space.

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