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Japan's Hiroshima Bank, with over USD44 billion in assets, is looking to invest in credit derivatives such as credit-linked notes and synthetic collateralized debt obligations. "We're now studying this," said Masakai Monden, manager of the investment department in Tokyo. He continued that the bank will likely invest in up to two or three synthetic CDOs next year, in increments of between USD10-40 million. "We'll look at it on a case by case basis," he explained. Hiroshima Bank will prefer a CDO structured on Japanese credits as it is more familiar with the companies.

KBC Asset Management, with EUR60 billion (USD53 billion) of assets under management, is structuring a capital-guaranteed product with an embedded lookback option, as European retail investors look for conservative investment products. Lode Roose, product development manager in Brussels, said the asset manager is structuring nine-year notes based on an underlying basket of 20 European and U.S. value stocks. The notes are 100% capital guaranteed and give investors 110% of the basket's gains.

Government-owned Korea Development Bank is planning to become the first domestic bank to offer structured credit products as well as trade credit-default swaps next year to take advantage of a growing hunger for credit risk in Korea. H.G. Chung, head of the financial engineering team in Seoul, said the bank is looking to tap the growing interest for the products in Korea, as well as reduce credit risk on KDB's balance sheet through offering synthetic balance sheet CDOs. Chung continued that the bank will target insurance companies as well as pension funds. The size of the initial synthetic CDO will likely be at least USD100 million.

Tom Ku, head of quantitative strategies at Greenwich, Conn.-based investment management company Paloma Partners, with USD2 billion in assets, is planning to leave early next year to launch a convertible bond arbitrage fund. Ku, who is responsible for developing convertible arbitrage strategies for Paloma Partners, said his hedge fund will use interest-rate swaps and credit-default swaps.

Credit Lyonnais is planning to bulk up its interest-rate and credit derivatives desk in Hong Kong in the coming months. "Year-end is a good time to complete the extension of our desks," said Frédéric Lainé, Asian head of fixed-income and derivatives, adding that it plans to complete its hiring process for next year in two months. The new recruits will report to Lainé.

A number of Wall Street firms, led by Merrill Lynch, are looking at creating the first synthetic securitizations in which life insurers hedge out the risk that policy holders die prematurely. A Merrill official said it is looking at the asset class and would aim to complete a deal in the summer if it can iron out potential pitfalls. The main problem is creating a structure that transfers the risk and is transparent and simple enough for investors to understand, the official said. Mitchell Lench, co-head of structured finance at Fitch in London, said the rating agency has been approached by a couple of investment banks about structuring securitizations on life insurance assets, but he declined to name the firms.

San Francisco-based Montgomery Asset Management, an investment firm with more than USD7 billion in global assets, plans to beef up its sales team from six to 11 professionals over the next six months, said Bill Santos, managing director. The sales team will market single hedge fund strategies, including convertible arbitrage strategies, which use credit-default swaps, interest-rate swaps and equity derivatives, and fund of funds. The move coincides with the launch of an absolute return fund of hedge funds called the Montgomery Partners Series last week.

Merrill Lynch's head of global emerging markets, George Handjinicolaou, who was responsible for foreign exchange, fixed income and credit derivatives, has left the firm. Handjinicolaou said he left late last month because of differences in opinion with the new management over business philosophy. He declined to elaborate. His responsibilities have been assumed by David Lund, head of global credit trading. Lund could not be reached for comment. Jessica Oppenheim, a Merrill spokeswoman, declined comment.

Westdeutsche Landesbank is beefing up its derivatives marketing team in the U.S. as part of a plan to boost its sales presence in the North American derivatives markets. The firm recently hired Brian Colgan, a senior derivatives marketer from Commerzbank Securities, according to an official at the bank. Colgan, who joined WestLB's New York office last month, is focusing on marketing derivatives products to non-European clients in the U.S. and Canada. Colgan declined to comment.

Salomon Smith Barney is advising clients who believe that it will take several months for airline stocks to rebound to pre Sept. 11 levels to sell short-term calls on the companies. As the airlines continue to struggle to restore confidence in the traveling public, Ryan Gould, equity derivatives strategist in New York, recommends that clients sell short-term calls struck at or near pre-Sept. 11 levels. The calls mature anytime before September and have a premium of at least 5% of the notional value. The trade is aimed at money managers.

A Facing Lift ... The sidewalk slab sporting the JPMorganChase logo in front of the bank's Park Avenue headquarters got a makeover last week when a blue, tough-faced vinyl covering went over the metal surface--which went over the original stone surface. Press officials at J.P. Morgan did not comment by press time last week, but the move to blue seems to address the weather beating the previous sign took. That sign was growing discolored at its panel seams and someone (a vandal? a rival banker?!) or something had knocked out some of the detailing in one of the letters. The new sign would seem to be resistant to those hazards. The right resistance is everything.

The Deal Roll-off Chart, provided by Capital DATA Loanware, lists the 50 largest leveraged credit facilities in the U.S. market that are due to mature in the coming month. It is designed to provide a look at potentially available money in the market as credits are renewed or retired.