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The International Accounting Standards Board made its most controversial proposals for derivatives accounting more palatable to this industry last week at a meeting in Rome. The IASB will bring revenue recognition rules more in line with U.S. GAAP and give accounting recognition for macro hedging, according to Wayne Upton, research director in London.

Four convertible arbitrage staffers on JPMorgan's proprietary trading desk in New York have left to start a hedge fund. Joe Wong and Yuri Omelchenko, a senior and associate trader respectively, are founding members of the newly forged fund manager, dubbed Linden Advisors, said an official familiar with the move. Tycho von Rosenvinge, v.p. in convertible quantitative research, and Volkan Gulboy, who worked in the technology part of the convertibles and relative value group, are also working on the fund, he said. All declined comment or did not return calls.

As a result of the volatile investment climate and with the value of Australian retail and international share funds falling, a risk adverse investment strategy is becoming a vital core component of any balanced portfolio. Increasingly, investors are looking for products that provide exposure to the stock market, yet offer the security of maintaining their initial capital outlays.

The International Swaps and Derivatives Association is looking at establishing operational and risk management committees for non-Japan Asia in the coming months. "If the critical mass is there, this may well happen this year," said Angela Papesch, head of the Asia-Pacific office at ISDA in Singapore. Papesch added that there has been some discussions in recent months to add operational and risk management working committees to focus on issues such as the effects of the impending Basel Accord. "With the Basel review process coming to a conclusion, it will become relevant for the jurisdictions to consider regional implications," said Papesch.

The New Zealand Debt Management Office, which runs an approximately NZD36 billion (USD20.9 billion) debt portfolio on behalf of the government, is considering using interest rate and foreign exchange options for the first time. "Options would be useful in enabling us to broaden our range of funding products [and would] enable us to more effectively hedge our fx exposure," said Philip Combes, treasurer in Wellington. Combes explained that the debt agency is looking at issuing bonds with embedded interest rate options as well as using fx options to hedge outstanding positions.

Merrill Lynch has started trading options on corporate bonds. "Bond options give a new dimension to investment strategies," said Chris Francis, head of international credit research in London, adding that they offer a less linear payout to bonds or default swaps.

A senior index equity options trader who is under investigation by the Chicago Board Options Exchange for a customer transaction he executed in 2001, has quit Morgan Stanley in New York. The trader, Harry Silver, could not be reached for comment. Melissa Stonberg, spokeswoman at Morgan Stanley in New York, confirmed that Silver recently resigned, declining all further comment. Nancy Condon, spokeswoman at the CBOE, declined comment.

Al Vinjamur, co-manager of a quantitative group at hedge fund manager SAC Capital Advisors in New York, has quit the firm and is preparing to launch his own hedge fund. Vinjamur confirmed having plans to launch a new fund, but declined to give further details saying that the fund's business plan has not yet been finalized. DW first reported in February that Vinjamur planned to leave SAC (DW, 2/9).

Five-year credit-default swap spreads on Sprint moved in Wednesday as word circulated that the telecommunications giant plans to make tender offers for some of its debt. Credit protection on the name tightened to 140 basis points last Wednesday afternoon, 10bps tighter on the day and 40bps tighter on the week with Sprint swaps having exchanged hands at 100bps the week before, according to a trader in New York.

Crédit Agricole Indosuez last week completed a USD50 million single tranche structured mezzanine note, believed to be one of the first sold in the mainland. "There's been lots of potential for CDOs in all of Asia--it's only natural that customers in China also follow the trend," said Pierre Trecourt, Asian head of credit derivatives structuring at CAI in Hong Kong.

"The number of circumstances where you can take front end profit will be very limited."-- Wayne Upton, research director at International Accounting Standards Board in London, commenting on the proposed accounting rule change. For complete story, click here.