Derivs - FX

The fx options market has been consistently bearish on the euro over the last six months due to eurozone sovereign debt concerns.

Legislation aimed at facilitating the establishment of South Korea’s central clearing counterparty is expected to be passed by the country’s parliament early next year, according to officials familiar with the process.

Dealers are expected to sell volatility via vanilla put options over the next few weeks to hedge long volatility exposure built through selling tail risk hedges on euro/U.S. dollar.

The State Administration of Foreign Exchange, China’s chief fx market regulator, could start varying the range of currencies it allows for exchange with the onshore renminbi sometime next year, approving more options against a greater number of currencies.

Hedge funds have been buying exotic window barrier puts on the euro/U.S. dollar cross over the past week.

The cost of foreign exchange swaps for certain U.K. firms looking to issue securitizations into the U.S. and Europe beyond the core U.K. investor base remain “prohibitively” expensive, according to Stephen Bowcott, head of securitization at Paragon Group.

Strategists at Barclays Capital have combined an analysis of tail beta, or the expected return of an underlying relative to the financial market as a whole, with a ratio of put prices to pinpoint inexpensive yet effective tail risk strategies for equity and credit portfolios.

Clearing is among the top concerns for financial end users, according to Luke Zubrod, director of regulatory compliance services at Kennett Square, Pa.-based risk advisory firm Chatham Financial.

Hedge funds and corporates have started to exit both one-year and one-month U.S. dollar/Chinese renminbi non-deliverable forwards after a brief flurry of buying activity early in November.

HSBC is to expand its fx platform across Asia, after rolling it out to investors in Japan in July.

A U.S. bank within the last week picked up at least USD500 million notional of U.S. dollar/yen calls with strikes at JPY85.00 expiring August of next year.

Investment funds are positioning for a eurozone break up via euro/Danish kroner puts, which have been seen strong flows.