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BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

AIG Trading Group has hired Behnouche Mostachfi, head of foreign exchange options at Commerzbank Securities in London, and Damian Zihlmann, senior market maker at Commerzbank in London, as senior fx options traders in London. Mostachfi and Zihlmann report to Donald Lee, global head of fx options and head of foreign exchange in Greenwich, Conn., said Beth Cutler, spokeswoman in Greenwich. Cutler declined comment on whether Mostachfi and Zihlmann were additions to the team or had replaced staffers who had departed. Lee, Mostachfi and Zihlmann referred questions to Cutler.

Credit market participants often follow stock prices to get some direction on credit-default swap pricing. Although there is extensive research on swap pricing, it is hard to find explicit examples of how to compute a simple relationship between the two. There are two popular approaches to modeling credit risky instruments, the structural approach and the reduced-form approach. The structural approach treats corporate liabilities as contingent claims on the issuer's assets. Assuming a simple capital structure composed of one zero-coupon bond and a layer of equity, an event of default occurs when the firm's asset value falls below the face value of the zero-coupon bond at maturity. Equity is equivalent to a call option on the assets of the firm, whose strike is equal to the face value of the debt.

The African Development Bank has entered an interest rate swap on a recent CHF300 million (USD226.1 million) bond to convert it into a floating rate liability. Thiebaut Julin, manager of the capital markets division in Paris, said the agency always enters interest rate swaps on its fixed-rate debt offerings because it has a policy to maintain floating-rate liability exposure. In the swap, ADB pays LIBOR minus a spread and receives the 1.5% coupon on the bond. The tenure of the swap matches the bond's five-year maturity, Julin noted.

Barclays Capital has hired Ed Somekh, senior managing director and marketer at Bear Stearns in New York, for a senior derivatives role. Linda Wynns, spokeswoman at Barclays in New York, confirmed the hire, but declined further comment.

Seoul-based Korea First Bank, with assets totaling over USD32.2 billion, plans to set up an interest rate derivatives trading book in the second half of this year. Jin Hang Lee, treasurer, said while the bank currently offers interest rate derivatives to its clients, these are hedged back-to-back transactions, and it wants to establish a proprietary book to trade swaps and options. "We'll start with simple swaps at first and then move to the next level," said Lee. He expects the board of directors to rubber stamp the plans by the second quarter. The existing trading team will handle the duties but Lee said as the operation grows he will consider adding more traders.