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The International Swaps and Derivatives Association has circulated a pre-publication draft of an agreement, which updates ISDA documents to work with the 2002 master agreement. Definitions and supplements drawn up before the 2002 master often refer to the 1992 master agreement, which could pose problems if the counterparties have signed the 2002 docs. The ambiguity stems from having to decide whether to enforce the 1992 agreement or select the equivalent outcome in the 2002 agreement, according to John Berry, associate at Allen & Overy in London and who assisting ISDA with drafting of the protocol.

LG Insurance, one of Korea's largest insurers by assets, is looking to invest in synthetic collateralized debt obligations for the first time in the coming months. "As the Korean bond market's yields are too low we need to find products with yield pickup," said Sang Heon Kim, manager of the fixed income department in Seoul. "We're currently reviewing CDOs," said Kim. The insurer has a KRW2.5 trillion (USD2.09 billion) fixed income portfolio.

The International Swaps and Derivatives Association is considering setting up a securitized derivatives forum, which would deal with a variety of issues surrounding structured listed derivatives. The trade association is due to discuss the plan at its board meeting on July 15.

Derivatives professionals expect the equity derivatives markets in Korea and Taiwan to take off in the coming months on the back of regulators loosening restrictions on foreign institutions shorting stock in Taipei and anticipated changes in Seoul. Taiwan legalized borrowing shares for hedging late last month, with further changes expected early next year, and Korea will likely increase the amount foreign institutions can short.

Seoul-based Korea South-East Power Co., with over KRW2.941 trillion (USD2.47 billion) in assets, recently entered a cross-currency interest rate swap on the back of a USD150 million Eurobond offering. H.K. Lee, manager in the financing department, said the entire fixed rate issue was converted into won at a different fixed rate level, declining to comment on specific rates. The proceeds of the Eurobond, KOSEP's first, will go toward general corporate expenditures, explained Lee.

Canada's TD Securities has hired Kazuo Anzai, sales manager at Prudential Investment Management in Tokyo, in a new role as a marketer in the credit products group in Tokyo as part of its plans to boost its credit derivatives sales effort in the region. "2003 is the year of highly-structured products in Japan," said Katsumi Mizutani, head of structured credit derivatives in Tokyo. Mizutani explained that with the growing interest in Japanese institutions for credit derivatives, TD is looking to increase its distribution capabilities in Japan by adding two or three additional marketers this year. TD facilitates trading for Japan out of its London hub.

Central bank regulations that effectively closed down the Philippine foreign exchange derivatives market could be lifted in the coming months. The Bankers Association of the Philippines has been working with its members and Bangko Sentral ng Pilipinas to ease restrictions on the maturity of derivatives transactions. Mark Andaya, consultant at the association, predicted the regulations would be softened in the coming months.

Market smile gives information about the marginal distributions of the underlying. The information is enough to price all European products without any confusion. This includes for example call-spreads, risk reversals, strangles, parabola contracts, log contracts and so on.

White & Case has hired Heather Pilley, consultant at Linklaters in London, as a partner. Francis Fitzherbert-Brockholes, co-head of the capital markets group in London, said the firm hired Pilley to increase its depth in derivatives and support its collateralized debt obligation practice.

Yapi Kredi Bank (Nederland) is considering boosting its investments in credit-linked notes and is eyeing collateralized debt obligations for the first time. Orhan Altas, head of treasury, said the firm is waiting for spreads to widen before making the plunge, adding that it tested the product last year and is happy with the result. He estimated that the bank could invest 3-5% of the firm's USD350 million of assets. "It is a growing market. You can never close your eyes to this development," said Altas.

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.