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Goldman Sachs is recommending trades that take advantage of an expected fall in equity implied volatility surrounding imminent earnings announcements. Altaf Kassam, associate in European equity derivatives and trading research, said the firm is recommending a directional and vol trade on AstraZeneca and Unilever. The trades capitalize on the view that implied volatility tends to fall off after earnings are announced by selling volatility. Kassam said Goldman has looked at stocks' implied volatility term structure to imply what the volatility for stocks will be around their earnings date to determine if the heightened implied volatility is justified historically.

Credit-default swaps spreads on insurance and reinsurance companies in Europe blew out substantially last week because of fears of the magnitude of their U.S. corporate exposure. From the previous Friday until Tuesday, mid-market protection on AEGON widened to 150 basis points from approximately 80bps. The name saw the most dramatic move over a short amount of time because of its exposure to the U.S. corporate bond market and the fact that it reports its financials in U.S. dollars, credit traders said. Mid-market protection on AXA widened out slowly over the past two weeks to approximately 150bps from 50-60bps.

HSBC is looking to offer interest-rate options for the first time in Malaysia on the back of growing customer interest, according to Aik Sai Hong, treasurer in Kuala Lumpur. "This is an extension of our capabilities," said Hong. He continued that the bank recently started educating clients about using local currency caps, floors and swaptions and that it will look to complete its first deals in the coming months. "We're looking forward to doing some transactions before the end of the year," Hong added. Interest-rate options will allow clients greater flexibility to hedge liabilities. The products will likely be sized around MYR10-50 million (USD2.6-13.1 million).

Credit-default protection on JPMorgan went on a wild ride last week, widening out by more than 50% at one point. Midmarket five-year default swaps were trading at 100 basis points late Wednesday in New York, up from 70bps at the start of the week. The swaps widened to as high as 110bps Tuesday, when the company's stock also had a double-digit drop.

Credit Lyonnais recently moved Morgan Gaughan, equity derivatives marketer in Hong Kong, to New York in a new role as head of equity derivatives marketing as part of the firm's push in the U.S., according to Julien Bahurel, senior sales manager in Hong Kong. Bahurel, to whom Gaughan reported in Hong Kong, said, "Our business in Europe and Asia is quite developed--now we're looking to focus on the U.S." He continued that the push is being spearheaded by Francis Biron, global head of sales in Paris, who assumed responsibility for Asia and the U.S.--in addition to Europe--a few months back. Bahurel said additional hires in the U.S. are likely in the coming months, but declined to elaborate. Biron was on vacation and could not be reached.

Eaton Corp., an industrial manufacturer and a member of the Standard & Poor's 500 Index, has entered an interest-rate swap with Salomon Smith Barney as part of a recent bond sale. Premchand Kanneganti, manager of corporate finance and capital markets at Eaton in Cleveland, said it entered the swap to turn part of the fixed-rate offering into a floating-rate liability.

Seoul-based LG Insurance Co., one of Korea's largest insurers by assets, is looking to increase its investment in credit-linked notes in the coming months as well as considering investing in collateralized debt obligations for the first time as it looks for higher yielding products in the current low interest-rate environment.

Merrill Lynch has hired two senior interest-rate derivatives marketers from Goldman Sachs for its strategic solutions group--its specialized derivatives distribution operation. David Covin and Chris Matchett have joined Merrill in New York as managing directors and co-heads of interest-rate derivatives sales to investment advisors and hedge funds. Covin could not be reached and Matchett declined comment.

Eurofima, a supranational financing company for European railways, converted its recent USD500 million (EUR496 million) bond offering into euros using a foreign exchange swap. An official said the company is arbitrage-driven and the lead underwriters on its bond deal--JPMorgan and UBS Warburg--presented Eurofima with the structure. The firms were also the counterparties on the fx swap.

Credit dealers in Asia noted a strong demand for credit protection on SK Corp, a Korean oil refiner. early in the week, on the back of a USD1.25 billion exchangeable bond, priced last Thursday. "Clients and dealers will want to hedge their bond positions," said Sandeep Gill, head of credit derivatives at DBS Bank in Singapore.

"More companies are at least doing the analysis and are getting their feet wet."--Bruce Vincent, executive v.p. in corporate development at Swift Energy in Houston, commenting on the growing trend among corporates to use over-the-counter derivatives to hedge their exposure. For complete story, click here.

When hedge funds were primarily of interest to high-net-worth individuals the need to understand the types of exposures taken on by these investment vehicles was practically non-existent. A hedge fund manager who now has over a USD1 billion under management told me four years ago that his prospective investors were only interested in receiving a one-page summary of his performance numbers. The ensuring discussions would then focus on the nuances of how the performance numbers were calculated. There was no interest in discussing the underpinnings of the firm's investment process.