Derivs - Interest Rate

Investors have been picking up hybrid range structures to maintain better yield levels in the low volatility environment.

The European Securities and Markets Authority has declared that a central counterparty should not exclude client positions from the calculation of the size of the default fund.

Hedge funds are buying structures to position for interest rates increases and appreciation in a particular currency. Combining the two options significantly reduces their premium.

The increase in hedging costs post-Dodd Frank will lead to a drag on fixed income portfolio returns, with costs ranging from 20-62 basis points for centrally cleared instruments, according to a report from Sapient Global Markets.

Ashwin Kulkarni, ex-head of interest rate volatility trading at Credit Suisse in New York, has joined Nomura as an executive director and head of U.S. interest rate volatility trading, also in New York.

Amendments to one of South Korea’s key financial regulations, designed to regulate mandatory central clearing of over-the-counter derivatives, should allow for mutual recognition of overseas clearinghouses.

Strategists at the Royal Bank of Scotland are recommending investors receive 9x12 forward rate agreements on the South African rand, to play the view that the South African Reserve Bank will not intervene in its currency.

Tradition has launched sterling interest rate swaps on its Trad-X IRS hybrid electronic trading platform.

ICAP is now trading sterling on i-Swap, its electronic interest rate derivatives platform.

The applicability of the Basel III credit valuation adjustment add-on against corporate hedging transactions could put Asian corporate clients at a disadvantage and result in less hedging, Nitin Gulabani, global head of fx, rates and credit at Standard Chartered, told DI in an exclusive interview.

Nancy Davis, the former head of trading for OTC, derivatives and credit at Goldman Sachs prop in New York, is to launch a discretionary global macro firm.

Since its inception, the non-FX/equity OTC derivative market was largely self-regulated. As the market grew from the late 1990s to mid-2005, this model worked well. New dealers were entering the OTC derivative market and competition amongst this group was fierce. However, as the participating dealer base peaked around 2005, so too did conditions of free money and leverage. These conditions helped fuel the financial crisis that would soon follow and completely reshape the OTC derivative and financial markets.