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The Bank of Korea, the country's financial markets regulator, is talking with several investment banks and investors about allowing an onshore market in synthetic collateralized debt obligations. Kang Nam Yi, a manager in the foreign exchange review division at the Bank of Korea, said it could make this decision within the coming months, but declined to elaborate.

Salomon Smith Barney last week hired Bernard Wai, equity derivatives marketer at Morgan Stanley in Hong Kong, as v.p. in the institutional sales group in Hong Kong, responsible for hedge fund coverage. Mei Zhang, spokeswoman at Salomon, confirmed the hire but declined further comment. The hire is part of a build up for its newly established institutional sales group in Hong Kong (DW, 3/10).

Tatsuya Takeda, v.p. in the e-markets group at JPMorgan in Tokyo, has joined Nikko Salomon Smith Barney in a new position as a director of structured solutions in the fixed income group. He will be responsible for marketing exotic interest-rate derivative structures, according to an official at the firm. Takeda, who starts next week, reports to Ikuo Morimoto, head of fixed income in Tokyo. The official said the firm is looking to expand its presence in the structured products market because of increased demand, declining to elaborate. Morimoto declined comment.

Credit-default spreads on Finnish telecom company Sonera tightened by roughly 50 basis points last week following its announcement of plans for a EUR5.75 billion (USD5 billion) merger with Sweden's Telia, marking Europe's first cross-border merger of national telecom companies. Mid-market five-year protection on Sonera was 75bps Wednesday, down from roughly 130bps earlier in the week before news of the merger. Telia's five-year spreads were about 5bps wider at 65bps.

Rod Prat, responsible for the origination of derivative mandates from European corporates and sovereigns at Goldman Sachs, has joined Deutsche Bank in London as managing director and head of European corporate structuring in its global markets unit.

This article introduces mixing theorems, a theoretical and computational approach to certain advanced option models. To begin, the Black-Scholes-Merton family of models is a well-known and sensible starting framework for understanding option prices. The framework relies on the assumption that the underlying stock price (or security price) follows a process known as geometric Brownian motion (GBM). This model has some very strong points in its favor: (i) it's consistent with stocks as limited liability securities and so the prices never fall below zero, (ii) it has uncorrelated returns, which have strong statistical support over many time scales, and (iii) it's very tractable computationally.

Scania, a Swedish truckmaker with operations in more than 100 countries, has entered an interest-rate swap to convert the proceeds of a fixed-rate bond it sold earlier this month into a floating-rate liability. The company entered the swap for most of the EUR500 million (USD441 million) it raised through the bond offering, according to Jan Bergman, head of the treasury in Södertälje. He said the company issued a fixed-rate deal to meet investor demand but it prefers to have the liability in floating-rate for its own risk management purposes.

Cathay Life Insurance, Taiwan's largest insurer with over TWD1 trillion (USD28.5 billion) in assets, is considering investing in credit derivative products such as credit-linked notes and synthetic collateralized debt obligations for the first time. "The idea is to diversify our portfolio," said Alex Chang, division manager of the international investment department in Taipei. The company has a USD2-3 billion fixed-income portfolio.

Credit-default spreads on Swedish and Swiss engineering concern ABB blew out last week and its curve inverted as buyers sought default protection on the company after a two-notch downgrade from Moody's Investors Service left it in a liquidity crunch. Five-year spreads widened roughly 300 basis points to 700bps Wednesday, with no offers, and the cost of one-year protection skyrocketed 500bps to 750bps.

Bear Stearns has hired Ralph Orciuoli, managing director of structured credit products at Bank of America in Tokyo, in a new role as head of credit trading in Tokyo, according to Lenny Feder, head of credit trading at Bear Stearns in Tokyo. Feder said the firm is looking to build up its credit derivatives group in the coming months, hiring two traders and two marketers. "We're looking to take it to the next level," said Feder, noting that with the recent revamp in Tokyo, which brought Feder over from the New York office in a new role (DW, 3/8), the firm is focused on expanding its credit derivatives business. Currently, the credit trading desk reports directly to Feder.

XL Capital Assurance has hired Iftikhar Hyder, a director in Barclays Capital's cash and synthetic collateralized debt obligation group in New York, as a managing director of credit. "I've been very happy at Barclays, but [XL] approached me and it's a very good opportunity," Hyder explained, noting he is moving up a notch to the managing director level. At XL he will report to Pat Mathis, senior managing director of credit in New York.

Bank of America plans to close its Asian equity derivatives desks in Japan and Korea. "Frankly, it just didn't make sense. The business wasn't there," Yaz Aiuchi, president of Banc of America Securities Japan in Tokyo, told DW. BofA will try to find alternative positions for the 12 Asian equity derivatives staff. "Our number one priority is to find alternative positions internally. However, if there's no right position then we'll have to ask them to leave."