Free content

Dresdner Kleinwort Wasserstein has promoted two equity heads to become co-heads of equity in Japan. James Hong was head of equity derivatives for Asia and Japan in Tokyo, while Ben Hao was both global head of quantitative trading and the head of equity cash trading for Japan. Hong said the purpose of the reorganization is to combine the strengthens of both desks.

One-month implied volatility on the euro/dollar jumped to 9.8% last Wednesday from 9.6% where it had traded the previous Thursday. The volatility move came as the euro rallied against the greenback, in spite of positive employment data released by the U.S. the previous Friday, noted a trader. The euro was trading over USD1.16 last Thursday, a two cent increase from before the data was released, he said.

The Financial Accounting Standards Board is developing guidelines which may make it less likely that CDOs will have to be consolidated onto an institution's balance sheet. The rule change will apply to the so-called FIN 46 accounting rule.

Bank Nederlandse Gemeenten, a Dutch bank that only lends to the public sector, has entered a foreign exchange and interest rate swap to convert a recent USD250 million 10-year bond into a floating-rate euro denominated liability.

Europe has led the charge in structured synthetic issuance over the past year although global volumes in the structures are down on last year. David Tesher, managing director at Standard & Poor's in New York, explained that in the year to Oct. 31 the ratings agency saw 190 rated synthetic deals come to market in Europe, compared with 43 in the U.S. and 33 in Asia. Of this number, however, 101 deals in Europe consisted of single tranches of less than USD20 million and in the U.S. the number includes 28 single tranche deals, he said. Synthetic volumes for this year so far stand at USD28.15 billion, compared with USD47.84 billion for last year.

The Financial Services Authority has amended its rules on first-to-default baskets to mean that protection sellers will have to hold less regulatory capital against some first-to-default baskets. Bankers said this could be a huge boon for the credit derivatives market. "If they are in the U.K., protection sellers will hold less capital against these instruments, so this increases the potential market for them," said Claude Brown, partner at Clifford Chance in London.

HSBC has hired Mark Lenssen, head of exotic foreign exchange and equity index products at The Royal Bank of Scotland in London, in a new position as a senior quantitative analyst for fx derivatives. Lenssen's role has been created to develop pricing models to increase the structured product range it offers, said Matt Desselberger, global head of fx options in London.

Investors in Asia are following Europe's trend and swapping 100% capital protection for more leverage. "Clients are looking for more upside exposure," said Kurt Ersoy, head of marketing for the equity derivatives and convertibles unit at Credit Suisse First Boston, in Hong Kong.

BlackHawk Capital Management will start selling credit default swaps for its USD40.7 million investment-grade corporate bond long/short fund. Doug Penick, managing director at the Iowa City-based firm, said it expects to start trading default swaps in the first quarter.

JPMorgan has established a credit and equity joint venture in Tokyo to offer hybrid structured products. The group will sit within the equity division and Clark Pitts, co-head of equities at JPMorgan in Japan, will spearhead the effort. Pitts declined comment.Mika Watanabe, spokeswoman in Tokyo, confirmed the initiative and said, "There is intense client appetite for more complex products that does not always sit tidily in one product area." He declined further comment.

Seoul-based Daehan Fire & Marine Insurance, with over USD700 million in assets, is considering using credit and equity derivatives for the first time. Sei Young Park, manager of the investment department, noted that it expects the equity market to lose some steam after this year's gains and will look at boosting yield via such products as equity-linked notes and credit derivatives next year. "We'll look at reallocating our portfolio then and possibly increase our bond holdings as well as use derivatives," said Park. Daehan has already put structured derivatives, such as credit-linked notes and synthetic collateralized debt obligations, under the microscope this year (DW, 4/6), but the strong performance in the domestic stock market means the insurer wanted to remain overweight in equities.