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Dealers Expect Tranched Products To Rocket On Back Of Index

17 Jul 2004

Credit derivative traders are expecting tranched credit index products to take flight in Asia in the coming months on the back of a new underlying index.

Credit derivative traders are expecting tranched credit index products to take flight in Asia in the coming months on the back of a new underlying index. "This concept is starting to filter into Asia," said an official at Lehman Brothers, noting that the firm has recently started to receive customer inquiries on tranched products.

The impending launch of the Dow Jones iTraxx Asian index in the coming days (DW, 7/12) means dealers believe will spur interest in tranched credit derivatives. Last year TRAC-X Asia was launched (DW, 10/13) and i-Boxx was planning a similar product (DW, 3/7), but it was put on hold when the two consortiums started merger talks.

Demand for tranched index structures will mainly stem from asset managers in the U.S. and Europe looking to take on Asian correlation risk, according to market officials. Interbank players, however, may also use them to hedge their overall Asian exposure.

17 Jul 2004