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Five-year credit protection on The Dow Chemical Co. blew out 15 basis points last week following a downgrade of its subsidiary Union Carbide. Credit-default swaps in Dow traded at 85bps last Wednesday, compared with around 70bps the previous week. Protection on Union Carbide, meanwhile, fattened to 600bps from 350bps over the same period, according to a trader.

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.