Firms in Korea have recently started structuring won-denominated constant maturity swap spread options as clients push for exotic structures to pick up yield. "This type of product was introduced last year in U.S. dollars--now houses are comfortable managing the risk and are offering it in local currency," said an official at Barclays Capital.
Marketers said clients have been eyeing selling call options on the spread mainly between five-year and two-year CMS. "This could offer around a 5 or 6% yield, depending on the market situation," said one marketer. Officials expect good interest in exotic interest rate structures in Korea this year, given the record-low domestic interest rates.
