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Barclays Global Investors in San Francisco unwound a credit-default swap on Walt Disney Co. last month after gaining a 20 basis point profit. Peter Freilinger, principal and head of the structured products group, said the firm bought five-year credit protection on the company following the Sept. 11 U.S. terrorist attacks because it correctly predicted spreads on Disney would widen. He added that the move was based on the assumption that the attacks would negatively impact the company's cash flow because of a drastic drop in visitors to Disney's theme parks.

Bear Stearns International is planning to hire two credit derivatives traders for its London-based team. Olivier Staub, who is currently the team's sole trader, said the hires would come as part of the firm's broader strategy to become a bigger player in the European market. "Bear is expanding in Europe and credit derivatives was identified as a key market to be in," he noted, adding the firm has made some hires on the sales and marketing side in recent months and now wants to complement that on the trading side. Staub himself is a relatively new recruit, having joined a few months ago from J.P. Morgan. Bear Stearns is also planning to hire for its London-based interest-rate product group as part of its European strategy (DW, 10/22).

Citibank has structured what is believed to be the first option on Korean Treasury bill futures. An official at the firm in Seoul said that a local corporate purchased a USD16 million over-the-counter option with a one-month maturity on the one-month future for the three-year Korean Treasury bond. "This is the first I've heard of," said a trader at a rival firm. He continued that the Korea Futures Exchange (KOFEX) is looking to list KTB options next year, and possibly options on KTB futures.

KBC Alternative Investment has bought credit protection on Pinault-Printemps-Redoute , a French distributor of luxury goods, as part of a convertible arbitrage strategy. Andy Preston, fund manager, said it bought a credit-default swap referenced to the French corp. and has a long position in a EUR1.3 billion (USD1.16 billion) convertible bond the company issued two weeks ago. The hedge fund's net position is long an equity call option on PPR, since it has hedged out the credit risk. The option allows the fund to convert the bond into equity at any price. However this would only make sense if the share price multiplied by the number of shares per bond was greater than the price of the bond, for this issue the level is EUR140.5, according to Preston.

Deutsche Bank plans to hire up to five new structurers and sales professionals for its London-based structured products group as the current volatile global equity market conditions fuel demand for equity-linked notes.Johan Groothaert, managing director and head of equity structured products and alternative investments in London, said the bank currently has a team of roughly 50 staffers in the structured products group and is overstretched. He added he is looking to add the personnel in the new year.

Deutsche Bank is arranging a EUR1 billion (USD8.98 billion) managed hybrid collateralized debt obligation, dubbed Jazz, which AXA Investment Managers will manage. Rival bankers said this is an innovative transaction and expect it to be one of the first deals to hit the market in which the manager actively runs a portfolio of default swaps. It could not be determined why the CDO is named 'Jazz', but one banker suggested it may be because Deutsche Bank hopes the deal will be music to investors' ears. Officials at Deutsche Bank and AXA declined to comment.

One-month euro/dollar implied volatility fell last week as the cash markets remained range-bound with traders waiting for word from central bankers in the U.S. and eurozone. Vol fell to approximately 10%, close to its lows for the year, from 10.3% the previous week. "The cash volatility is just not there, so vols are at low levels and justifiably so," said one trader. He added, "every day that it's at or around USD0.90 it means more certainty and that means less options are bought."

Equity derivatives traders in Hong Kong are gearing up to restart the domestic warrant market after new postings completely dried up in June as firms waited for new regulations to be issued. Firms stopped posting warrants on the Hong Kong Stock Exchange after Hong Kong Exchanges and Clearing issued a consultation paper on May 31 proposing rule changes, according to traders.

Spreads on Eastman Kodak credit-default swaps widened approximately 100 basis points last Wednesday on the back of a credit rating downgrade on its debt and uneasiness among investors over the company's declining profits.

J.P. Morgan has launched what it believes is the first high-yield credit-default swap index representing the five-year credit risk of a linear basket of 100 junk bond issuers, according to officials at the firm. "The main reason we did this is because until now, there have been no good alternatives to trade the market as a whole from the long and short side," said Angie Long, head of high-yield credit derivatives trading in New York. The product has been correlated to traditional high-yield bond indices and will allow clients to both invest and hedge their exposure to the U.S. high-yield market through the use of high-yield credit derivatives. The product is designed to cater to clients looking to allocate assets in high yield, Long said.

ORIX Corp., one of Japan's largest financial services companies with subsidiaries across the globe and JPY5.3 trillion (USD44 billion) in operating assets, is planning to increase its use of credit-default swaps to buy protection on its USD2 billion bond and loan portfolio.

Deutsche Bank and J.P. Morgan, which are going to start offering derivatives based on economic statistics (DW, 10/29), will employ new technology and intellectual property called Parimutuel Digital Call Auction (PDCA) technology, developed by Longitude, to create the derivatives.