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Credit Lyonnais is planning to hire a weather derivatives marketer in the first quarter and is interviewing candidates. The firm hired Peter Brewer, structurer in weather derivatives in London, from Aquila in May to build up its presence in the weather market, and because Credit Lyonnais has seen adequate demand for weather derivatives products, it would like to have a marketer dedicated solely to the effort, Brewer said. Currently the products are sold through marketers that sell a wide range of products, including weather derivatives.

An expected resurgence in mergers and acquisition activity in Australia this year will likely filter into over-the-counter equity derivatives, according to Aussie equity professionals. "Last year it was rather lackluster but it seems to be back on the radar," said one equity head. As the economic environment has stabilized after the shock of Sept. 11, corporates in Australia are again looking at M&A.

Credit derivatives traders and investors are awaiting the resolution of outstanding credit default swaps (CDS) on TXU Europe Group and market professionals say the outcome likely will set a precedent for how the CDS market responds to future bankruptcies. TXU Europe filed for bankruptcy in November but CDS contracts were written on TXU Europe Group.

Five-year credit protection on El Paso Corp. dramatically widened last Wednesday, blowing out to 1,250 basis points, from 1,000 bps where it had traded the previous week, said a New York-based trader. The move followed an announcement by the energy company last Wednesday of its intention to cut its dividend by as much as 82%, sell USD2.9 billion in assets and cut capital spending, the trader noted.

Fitch Ratings expects to change the ratings methodology it uses for collateralized debt obligations to bring it in line with the methodology it uses on n-to-default structures, according to Stefan Bund, senior director in London. The agency published a report on the importance of correlation in rating n-to-default products last week.

Euro/dollar risk reversals continued to favor euro calls/dollar puts last week, but interest in the risk reversal dropped last week as investors who were long euro calls took profits. Traders said the 25-delta risk reversal fell to 0.45% Thursday from 0.9% earlier in the week and implied volatility stayed in a range from 10.2-10.6%.

Credit portfolio risk managers at several firms in Europe, including ABN AMRO and JPMorgan, are attempting to kick-start a bilateral credit default protection market to better manage their exposure to names that are not among the approximately 120 most actively traded. Risk managers either can't find quotes or are quoted mile-wide bid/offer spreads on names outside the 120 list, according to market officials. The solution, which could dramatically increase the depth of the credit derivative market, may be to match up natural buyers and sellers of protection on a given name or group of names, because, unlike dealers, both buyers and sellers have an incentive to arrive at transactable prices, said a credit portfolio manager.

Al Vinjamur, co-manager of a quantitative group at hedge fund manager SAC Capital Advisors in New York, is reportedly considering the launch of his own U.S. equity long/short fund. Reached at home, Vinjamur denied having plans to leave SAC or launch a new fund, but added that he is taking some time off. "I'm very happy working at SAC," he said. "I've no plans to leave."

JPMorgan next month is bringing aboard Han Joon Kim, v.p. in fixed income covering Korean corporates at Goldman Sachs in Hong Kong, in a similar role for its rates desk in Seoul. "We didn't think our size was big enough to fully tap the market--we wanted to hire a senior guy," said M.H. Kim, treasurer in Seoul, to whom Han Joon Kim will report. Officials familiar with the situation said Kim wanted to relocate to Seoul for family reasons.

Keith Jacobson, managing director and former head of the recently disbanded strategic solutions group (SSG) at Merrill Lynch in New York, has left the firm. After SSG, a specialized group responsible for structuring and marketing derivatives-based transactions, was merged into Merrill's derivatives sales division last November, Jacobson's role was eliminated (DW, 11/10). Jacobson quit late last month after failing to find a suitable role within the firm, explained one Merrill insider.

Andrew Feldstein, managing director and co-head of North American structured products and derivatives marketing at JPMorgan in New York, has resigned. Michael Dorfsman, a JPMorgan spokesman in New York, confirmed the resignation, adding that Feldstein is exploring other options within JPMorgan or in partnership with the firm. Calls to Feldstein's office in New York were not returned.

Introduction Currency fund and currency overlay programs have become the flavor of the month for investors. These products both utilize bespoke and often confidential trading models to take advantage of the volatile currency markets. Funds use models to predict when spot, forward or sometimes option trades should be placed to generate return, while overlay programs use the same models to make hedging decisions. The fund products can, at their best, generate healthy annual returns (in some cases 7%-10% of the face value of the trades), while good overlay programs offer option-like protection and the possibility of 1%-3% return enhancement. These are the results from the best, of course. Choosing the right overlay provider or currency fund is a critically important decision.