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Dresdner Kleinwort Wasserstein is planning to merge its debt syndicate and credit trading group with its credit derivatives operation. The move would combine the departments of DrKW's highest profile credit stars: Sean Park, managing director and global head of debt syndicate and credit trading, and Matteo Mazzochi, global head of credit derivatives and securitization. Rowan Staines, spokeswoman, declined comment.

This is the second in a two-part series examining the U.S. accounting change. Last week's article gave a general overview, this week the authors focus on hedge accounting.

One-month euro/dollar implied volatility spiked to 11.17% last Wednesday, up from 9.8% the week before, as the greenback continued its slide against the single currency in the spot market. Spot traded at USD1.189 on Wednesday, compared with USD1.15 seven days previous, according to a trader. The move was largely attributed to a Bush administration statement on Tuesday saying that the U.S. would impose import quotas on some Chinese textiles, he noted.

Seoul-based Korea Exchange Bank plans to set up a credit derivatives operation next year to take advantage of the growing interest in the instruments. Dennis Chae, an official in the financial engineering department, said the bank plans to structure and invest in products, such as synthetic collateralized debt obligations and credit-linked notes. The move follows the bank's foray into equity derivatives in the spring (DW, 3/10).

Interest rate derivative volumes in Korea, one of the largest Asian swap markets, have shot up dramatically in recent weeks, a stark contrast to the lulls during most of the year. "We're going to have a busy winter," said S.B. Hwang, head of derivatives marketing at Citigroup in Seoul, noting that volumes have picked up by nearly 40% in the last few weeks. Earlier this summer, the Korean fixed income derivatives market endured a drop in activity due to a lack of liquidity and customer interest as rates remained low, which forced major players to cut back their prop trading books (DW, 6/1). The anticipated interest rate rise means there has been a large increase in demand for hedging products. "This relates to the domestic and world economy picking up--there's expectations of rate increases," noted Kwang Ho Park, deputy general manager at Kookmin Bank in Seoul.

Macquarie Research Equities last week turned its quantitative firepower on Saturday's Rugby World Cup clash in Sydney and predicted that Australia will defeat arch rivals England. In the research report, Why the Wallabies will win?, Macquarie's propeller heads weighed the likely impact of factors such as momentum, consensus recommendations and the weather. The authors of the report in Sydney could not be reached for comment. A spokeswoman was unable to comment by press time.

Since well before the Mexican devaluation of 1994, investors and firms have had the ability to create or offset convex peso currency exposures using options. When it comes to interest rates, however, only recently have options become readily available, in the form of caps, floors and swaptions. Users now have the tools at hand to create or hedge contingent interest rate assets or liabilities denominated in Mexican pesos.

Five-year credit protection on U.S. power distributor FirstEnergy popped last week after a U.S./Canadian task force blamed the corporate for the Aug. 14 blackout. Last Wednesday protection on the name widened 10 basis points to 100bps, before settling back in around 95ps, according to a trader. Movement came as bond holders sought protection on the corporate, with dealers also showing interest in selling swaps on the name, he said.

UBS Securities is stepping back into the covered bond business and has hired two top professionals from Deutsche Bank to spearhead the effort, according to DW sister publication BondWeek. The firm closed its covered bond desk around two years ago, according to one market participant. Dirk Burmeister and Haiko Heuer, who will start in Frankfurt early next year, report to Stephen Bell, global head of trading. Bell was traveling and did not respond to an e-mail. Burmeister, who worked as a senior trader, and Heuer, who was a structured products specialist at the German bank, will work in similar roles at UBS. Samantha Smith, a UBS spokeswoman, did not comment by press time.

MeesPierson, the private banking arm of Fortis Bank, has sold a single-tranche collateralized debt obligation to its high-net-worth clients. Koen Zoutenbier, product development in Amsterdam, said it has sold EUR150 million (USD179 million) of the note to both advisory clients and discretionary accounts. It sells the CDO in chunks of EUR1,000.

Chinatrust Commercial Bank, one of Taiwan's largest banks with around TWD849 billion (USD25 billion) in assets, is planning to issue the first Taiwan dollar-denominated synthetic collateralized debt obligation and is discussing co-structuring the deal with international banks. "We're putting more resources into this product," said Gloria Hsu, v.p. in the product development group in Taipei, noting that the bank is looking to structure three CDOs next year referenced to onshore credits in the domestic currency. "It will probably be a first," said C.G. Lai, head of fixed income at BNP Paribas in Taipei. The French bank is not currently signed up to structure the deal, but Lai said it will likely speak with Chinatrust about these types of instruments.