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A record-breaking Aussie dollar/greenback double no-touch option traded Wednesday, which several dealers said was the largest trade of its kind and one of the largest ever exotic options. Carl Nabar, v.p. in foreign exchange options trading at AIG Trading in Greenwich, Conn., said the trade, which has a payout of AUD20 million (USD13.2 million), is the largest exotic option to hit the market in years. Typically single options trade with payouts of USD1-5 million, he explained, adding that anything over USD10 million is huge.

Seoul-based Dongwon Securities, with KRW1.9 trillion (USD1.62 billion) in assets, recently structured a five-year equity-linked note, which is believed to be the longest maturity issue to date in the nascent onshore Korean mart. "This has the longest tenor in the market," said B.J. Kim, executive v.p. at Dongwon, noting that previous deals have stretched out to three years. The USD20 million note is linked to the KOSPI 200 index and contains range digital options and a knock-out option.

Credit Lyonnais is considering launching a callable interest rate derivatives trading book in Taiwan in the coming months on the back of growing market sophistication. "We're moving from one-off products to a more active market," said Frédéric Lainé, Asian head of fixed income and derivatives in Hong Kong.

Merrill Lynch recently launched what is believed to be the first principal protected structure on Chinese shares structured with a threshold guarantee rather than options. John Robson, managing director and head of structured products in the global equity markets group in Hong Kong, said Merrill has offered capital guaranteed notes on mainland China shares that incorporate the traditional bond plus option structure, but opted for a constant proportion portfolio insurance (CPPI) structure because the global sell off in bonds and falling equity volatility meant it is now more attractive.

MBIA is securitizing a USD2.5 billion chunk of its collateralized debt obligation portfolio to manage its mark-to-market risk. The risk is being transferred through a planned synthetic CDO of CDOs that the monoline is readying with Deutsche Bank, according to several officials who have seen the deal. The move is thought to be the first attempt by an insurer to manage its mark-to-market risk in this way and will likely pave the way for other protection sellers to follow suite. Debra Descloux, spokeswoman at MBIA in New York, and Harriet Benson, spokeswoman at Deutsche Bank, declined comment.

Collateralized debt obligations need to become more transparent if European pension funds are going to invest, but if they do the potential rewards are huge. Nick Horsfall, a specialist in asset allocation for bond related products at Watson Wyatt in London, predicted that the top 20 funds would eventually put between 2.5-5% of their assets in CDOs if they were more transparent. This equates to GBP5-10 billion (USD7.9-16 billion) in the U.K. alone.

Rafael Berber, head of the global equity-linked group at Merrill Lynch in London, has been ousted from his role in a recent reshuffle. The firm is looking to place him in another role internally, according to an official. Michael DuVally, spokesman in New York, declined comment and Berber did not return calls.

Investor, the Swedish holding company, has converted a EUR600 million (USD656 million) seven-year bond into a synthetic Swedish krona denominated liability. Pernilla Jeansson, head of treasury in Stockholm, said the company chose to issue the bond in euros since this gave the corporate access to a larger market and longer maturities.

European retail investors are starting to favor leverage over capital protection as more start to believe equities are going to rally. Over the last two years a retail product had to be 100% capital guaranteed and offer some income to sell, but investors have recently been more interested in getting leveraged growth, said Andrea Minetti, head of Southern Europe institutional structured product sales at Deutsche Bank in London.

Seabulk International, a Florida-based shipping fleet owner, is considering entering into an interest-rate swap on a recent bond issue. Vincent deSostoa, cfo in Fort Lauderdale, said the likelihood of LIBOR remaining low for some time is making a fixed-to-floating swap look attractive.

The economy and financial markets have a large impact on the performance of insurance companies. In the long-term, rising per capita income and property values have an impact on demand for insurance, increasing premium growth. In the short-term, however, the economy and markets primarily affect insurance companies through the valuation of assets and liabilities. On the liabilities side, lower inflation reduces the cost of future property/casualty insurance claims. For life insurers, low inflation generally lowers interest rates so insurers with interest rate guarantees in their life/savings policies may suffer financial stress if rates decline sufficiently. On the asset side, insurance companies hold mostly bonds and equities to pay future claims. These assets rise and fall along with interest rates, credit spreads, corporate default rates, equity markets and--if the company owns foreign assets--exchange rates. In managing these risks, insurers may shift asset allocations, alter their allocation of risk capital, change the terms and conditions on their policies and hedge their interest, market and exchange rate risks with derivatives. Stress Test

People are the greatest assets ... Confirming that it's unlikely many traders would jump to another shop with the year hitting its last quarter and bonuses on the line, a trader said, "They would be trading with a lot of accrued interest."