Derivs - Equity

Some hedge funds are playing call dispersion strategies that mimic their usual long/short equity plays to take advantage of movements in volatility and correlation.

With interest rates around the globe plummeting, some market participants are beginning to wonder what would happen if the recipient of payment under a derivative contract is suddenly in the position of owing money.

Barclays Capital is recommending investors buy three-month rolling put options on equity indices instead of one-year maturities, taking the view that economic recovery in the New Year may calm the markets and send vol lower.

Chris Arriz, an executive director in equity derivatives at JPMorgan in New York, was laid off this past Monday, in the wake of five other members of the team exiting in the last two weeks.

Florian De Sigy, European head of equity derivatives and fund sales at Deutsche Bank, is expected to have his position eliminated. The move comes after last week’s departure of Kim Gayer, global head of a recently created umbrella group covering structured products.

Stefan Muelheim, managing director and head of Citigroup’s equity and fixed income derivatives and cash sales to Germany, looks likely to be leaving the bank.

Novations are proving a sticking point in the move to see credit default swap transactions confirmed on the same date as the original trade. Since three parties are involved in novations when counterparties trade in and out of positions, the transactions take much longer to confirm.

Stefan Muelheim, managing director and head of Citigroup’s equity and fixed income derivatives and cash sales to Germany, looks likely to be leaving the bank.

Banks are increasingly looking at structures that would allow investors to benefit from climate change initiatives, expected to be a priority of Barack Obama’s administration.

Banks, notably in Asia, have been stung by recent high correlation between debt and equity, with collective losses in the billions of dollars as traders’ hedging strategies didn’t offset the huge risks on their books generated by structured product sales. The retail market had been loading up on investments that lost money for dealers when correlation spiked.

Fergus Slinger, a managing director in equity derivatives flow sales, has exited Deutsche Bank in London. Three equity derivative junior traders at the bank have also gone.

Derivatives trading and sales executives at global investment banks can expect bonuses up to 50% lower than those from last year. That’s the view of Eric Moskowitz, head of search firm the Options Group’s compensation consulting practice.