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Thanks to US Federal Reserve chairman Alan Greenspan, the Latin debt capital markets have had a strong year so far, with more than $10.5bn of issuance compared with $9.6bn for the same period in 2000 - despite the clouds gathering over Argentina. Danielle Robinson reports.

Finova Group is the name of the day as the $6 billion bailout proposal by Leucadia National Corp. and Berkshire Hathaway has sparked a flurry of trades and pushed prices up to the mid-80s. Things could get even more interesting as one trader said he is not ready to count out the bid for control by General Electric Capital Corp. and Goldman Sachs. In other distressed trading news, A $10 million piece of Warnaco traded at 43.

BNP Paribas, Credit Suisse First Boston, Morgan Stanley Dean Witter and Schroder Salomon Smith Barney reportedly riled up the euro swaps market last week as they prepared for a USD7-8 billion France Telecom bond issue they are lead managing. Some USD3 billion (notional) traded in the euro swaps market last week as the lead managers positioned themselves for France Telecom potentially wishing to hedge and proprietary traders attempted to front run the positions, according to a trader.

Five-year protection on DaimlerChrysler widened 20 basis points last week to 145 basis points/155bps as traders prepared for today's release of the company's results. John McEvoy, co-founder of creditex in New York, said demand for credit protection on the name spiked last week. He estimated at least twice as much protection in the name traded as in an average week, with demand originating with bank prop traders and bond holders hedging their positions.

European credit derivatives traders were advising their colleagues at German banks to take it on the chin as the financial crisis in Turkey unfolded last week. German banks, including Deutsche Bank, Commerzbank and Dresdner Bank, are believed to have huge basis risk on commercial loans they have extended to Turkish banks, which they have imperfectly hedged by purchasing credit default protection on Turkish sovereigns. "Sit on it and pray," said a trader at a U.S. bank in London. He noted that if the Turkish banks default without an accompanying sovereign credit event, the German banks could be left with substantial losses. Officials at the three banks declined comment.

Paul Croft, chief operating officer of global markets, Japan at Deutsche Bank in Tokyo, has resigned. Croft said he is stepping down to support his wife's business interests in California. He declined to comment on who would be replacing him, but noted that he would remain at the bank for a while to ensure a smooth transition for his successor.

Fortis Bank plans to buy a two-year knock-in put to structure a knock-in reverse convertible linked to shares of Royal Dutch. Leen Verdonk, derivatives salesman in Amsterdam, said the EUR50 million (USD45.73 million) put will be struck at a value equal to the stock's price at Wednesday's close. The knock-in level will be 10% below the strike. Royal Dutch shares opened at EUR66.46 last Monday.

Goldman Sachs has added exotic foreign exchange options to its online trading platform for customers. Zar Amrolia, managing director and global head of foreign exchange sales and e-commerce in London, said Goldman Sachs is the first bank to offer a purely online system which broadcasts prices. He added that offering American-style digital options, which are the building blocks for 90% of structured products, allows clients to execute almost any structure online. The bank has built the system for five currency pairs: euro/dollar, euro/yen, dollar/yen, cable and Australian dollar/U.S. dollar. Within several months, it will expand that to 20 currency pairs.

The interest-rate implied volatility surface exhibits a maturity and smile or skew (strike dependent) structure. This observation means that the interest rate market does not follow the Black-Scholes model.