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A host of major firms, including Goldman Sachs and Morgan Stanley, are reportedly sitting on substantial unrealized losses in their equity derivatives books as a result of dwindling implied volatility. Equity desks have been entering collars with customers since last year in which the banks are long calls and short puts, according to traders. Firms that did not hedge their positions are sitting on mark-to-market losses as a result of time decay. Players that have hedged their positions by selling futures are holding an increasingly asymmetrical hedge as the value of their option position diminishes. One head of equity derivatives said risk managers will start to force traders to close out the positions and realize the losses in the next three months if the situation persists. Officials at Goldman and Morgan Stanley did not return calls.

Dresdner Kleinwort Wasserstein's alternative investments group plans to hire two senior-level bankers within the next few months as it expands its product offerings. Mehraj Mattoo, managing director and global head of the alternative investments group in London, said he would look for professionals with experience of structuring derivatives on hedge funds.

Coronation International has launched a new fixed-income hedge fund and will be adding a convertible arbitrage fund and a closed-end fund in the next four to six weeks. Stuart Davies, who heads arbitrage hedge fund business development in London, said the firm is in the process of converting its main business from that of proprietary trading to a family of hedge funds, using capital from the proprietary trading operation, allowing the firm to attract outside capital as well.

Azam Mistry, director and head of risk management advisory for treasury and capital markets at HSBC in Hong Kong, has resigned. Market officials noted that Mistry is a well-known figure in the region for his role as a director for the International Swaps and Derivatives Association. Mistry declined comment.

ICAP will begin brokering trades for emission credits and renewable energy derivatives within the next few weeks. Currently the firm is putting contacts in place and as soon as prices are available will begin to broker its first trades, according to Katleen De Cock, weather and environmental derivatives broker at ICAP in London.

ING Financial Markets recently lost Singapore-based Mahmood Jumabhoy, head of financial markets for Southeast Asia, and Eric Lam, director of the structured products group, who resigned for what market officials attributed to lower than expected bonuses, which were paid out earlier this year. "Bonuses weren't up to par," noted a headhunter in Hong Kong.

JPMorgan recently hired Jason Sippel, director and structurer at Gen Re Securities in Tokyo, as a v.p. in the credit and rates markets group in Tokyo. He reports to Ashley Bacon, Asian head of rates markets in Tokyo, who said Sippel's role within the group is still under discussion. "We're still figuring out his position. He's a talented guy, there's a lot of jobs that he could do." He added, Sippel is an opportunistic hire and may focus on either fixed-income or credit derivatives products.

Moody's Investors Service has hired Dan Chen, an assistant v.p. in JPMorgan's global portfolio management and technology group in New York, to join its synthetic collateralized debt obligation ratings team. He joined the 17-member team two weeks ago and is filling a newly created position, according to Chen. He reports to Jeremy Gluck, head of resecuritization market value products.

Société Générale Asia and Barclays Capital Asia recently started marketing credit-linked notes with embedded interest-rate products for the first time in the region, because yields on traditional CLNs have fallen, according to officials at the firms. "The interest-rate component adds extra juice," noted an official at SG Australia.

Five-year credit-default protection on AOL Time Warner widened about 60 basis points in the wake of weak investor demand for its recent USD6 billion bond offering. Credit derivatives traders reported that New York-based AOL, the world's largest Internet and media company, was among the most heavily traded names last week as hedge funds and investment banks looked to buy protection on the bonds. Spreads on AOL widened to about 160bps last Wednesday from about 100bps on April 2 the day before the company's bond offering. "The bonds just haven't done that well. Spreads have widened on the bonds more than anyone thought they would," said one trader. "They've been really trading off and people are buying protection."

Alan Burnell, head of European government bonds at Deutsche Bank in Frankfurt, has joined Barclays Capital as a managing director and head of euro swaps and government bonds. He will report to Eric Bommensath, global head of fixed income.

It was Samuel Johnson who said "Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully." Trading losses may not be up there with being hanged in a fortnight, but they can certainly concentrate the mind.