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One-week euro/dollar volatility jumped to 8.75% in afternoon trading Wednesday from 8.3% earlier in the day, according to London-based traders. Some said vol rose as traders bought euro puts/dollar calls to hedge options they had sold to Morgan Stanley and Goldman Sachs the week before. Two weeks ago the two bulge bracket U.S. firms had bought over a yard of euro puts/dollar calls with USD0.90 strikes in a three hour feeding frenzy (DW, 5/13).

European lawyers and credit pros are working on another modification to the International Swaps and Derivatives Association restructuring definition. The focus is on transferability of loans and the deliverability of the restructured obligation, according to Richard Williams, head of credit derivatives at Abbey National Financial Products and the European buyers of credit protection representative on ISDA's group of six committee. Once this definition has approval from the European regulators the credit players will pitch it to U.S. dealers and end users in an attempt to get one global definition.

Bank of America has hired Mitchell Lench, head of synthetic collateralized debt obligations at Fitch Ratings in London, for its CDO origination team, according to Kenneth Gill, managing director and head of cash CDOs in London. Gill has taken over responsibility for synthetic CDOs.

Fortis Bank Hong Kong recently hired Jason Kim, v.p. in fixed-income marketing at ING Financial Markets in Seoul, as a director. Kim said he is covering the Korean fixed-income market and reports to Philippe Dirckx, head of fixed income in Hong Kong. Kim is a replacement for Millo Park, senior manager, who joined Merrill Lynch in Hong Kong as a v.p. in the investor client group in March. Park declined comment.

Dexia Municipal Agency, a public sector financing agency, entered a cross-currency interest-rate swap on its recent USD1 billion offering. Véronique Hugues, funding manger in Paris, said the company is receiving a fixed rate equal to the 4.875% coupon on the bonds and will be paying a floating interest rate, though she would not detail the rate. In addition, proceeds from the dollar offering were exchanged into EUR1.099 billion.

China Merchants Holdings (International), an infrastructure and shipping conglomerate with HKD11 billion (USD1.41 billion) in assets in Hong Kong, is considering boosting its investment in equity-linked notes. "We like the enhanced yield," said Tim Shen, head of investment and research. Shen is currently planning the investment portfolio, but is yet to decide on how much the company will allocate to the notes.

The San Francisco-based headquarters of Barclays Global Investors, a global institutional investment firm with more than USD800 billion in assets, is planning to manage its first synthetic collateralized debt obligation, according to a firm official. BGI's first deal is expected to hit the market within the next two months.

The International Swaps and Derivatives Association recently appointed Junichi Kamei, branch manager of Crédit Agricole Lazard Financial Products Bank in Tokyo, as a policy director and head of the Tokyo office. Kamei said he joined at the beginning of the month.

Norinchukin Bank, part of the Total NorinchukinGroup with over JPY60 trillion (USD470 billion) in assets, plans to start trading credit-default swaps by year-end. "We'll look to put on proprietary positions," said Michimasa Soga, senior manager of the derivatives and fixed-income department in Tokyo. Soga said the bank will probably start small, putting on a few trades at a time on Japanese credits. He declined to comment on the potential size of the trading book for default swaps. Currently, the department trades bonds and interest-rate derivatives.

Atradis Fund Management, a recently established hedge fund manager in Singapore, is looking to use over-the-counter foreign exchange options. The fund, dubbed the Atradis Barracuda Fund, began trading earlier this month and plans to use OTC currency options to hedge currency risk on equity positions in the Asian region, noted Richard Magides, fund manager. The year-end target for assets under management is USD70 million.

Berkshire Hathaway v.p. Charlie Munger's recent claim that "To say derivative accounting in America is in the sewer is an insult to sewage," may have been a trifle melodramatic, but many market professionals share his concern and agree that something is rotten in the state of Denmark. In particular, the collapse of energy trader Enron has thrust derivatives accounting and disclosure into the spotlight and ratcheted up the sense of unease among investors.

Credit-default swap spreads on Fiat widened approximately 80 basis points in the beginning of the week for both five-year and two-and-a-half year protection after the Italian car manufacturer posted a larger than expected net loss for the first quarter on Monday. Swap spreads were trading at 450bps/480bps for five-year protection and 480bps/530bps for two-and-a-half year protection by last Wednesday. Traders said convertible arbitrage funds were big buyers of protection in the two-and-a-half-year portion of the curve to match Fiat's outstanding convertible offering. One trader estimated EUR50-100 million (USD 4.5-9.13 million) traded from Monday to Wednesday. Typically volumes would be in the low end of that range.