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The Yasuda Fire & Marine Insurance Co., one of Japan's largest insurers with over USD36 billion in assets, is considering increasing the size of its credit-linked note investment portfolio in the coming months from the JPY50 billion (USD376 million) it purchased before fiscal year-end last month. Takeshi Ushiki, deputy manager of the financial services department in Tokyo, noted that with credit-default swap spreads narrowing in Japan credit-linked notes look more attractive. He continued that management is currently discussing increasing the use of credit-linked notes as part of its strategy for the coming year but declined to elaborate on a targeted investment range.

A Lloyd's of London syndicate managed by Hiscox is prepping its first earthquake risk catastrophe bond, according to a CAT bond professional in New York. "This is Lloyd's first CAT bond. It makes the deal quite interesting," the analyst added. The USD25 million CAT bond will securitize California and New Madrid, Mo., earthquake risk.

Deutsche Bank has hired Rachel Bobillier, a credit derivatives saleswoman to alternative funds at JPMorgan, in a similar role. Wadih Canann, the only other credit derivatives salesperson to hedge funds, said the firm has hired her to meet increasing demand.

Merrill Lynch was putting the finishing touches to a JPY40 billion (USD304 million) synthetic collateralized debt obligation referenced to a pool of unrated and high-yield assets last week.

MMC Enterprise Risk, an operating entity of New York-based Marsh & McLennan Companies, has hired Ram Kelkar, a managing director in Merrill Lynch's structured finance group in New York, to head its enterprise risk management team for the Midwest region in Chicago, according to an official. Kelkar left Merrill last week.

Moody's Investors Service is beefing up its synthetic collateralized debt obligation ratings team in New York, according to Isaac Efrat, managing director. The firm plans to add two professionals to its 17 member team in the coming weeks. The new hires will report to Efrat and William May, senior v.p. in the structured finance group.

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.