Search results for

Foreign banks in Thailand, including Citibank and HSBC, have started receiving requests for interest-rate options from corporates looking for more sophisticated hedging products. HSBC expects to pull the trigger on its first baht option in the coming months and has already priced several deals for its clients, said an official close to the firm. Much of the demand comes from manufacturers looking to manage loan liabilities. Clients are starting to look at sophisticated derivatives products now because foreign banks have only recently--in the last two or three years--started to move onshore, said a banker in Bangkok.

Fortis Bank is marketing a five-year guaranteed note on the Dow Jones EURO STOXX 50 index that is structured using over-the-counter call options. Koen Zoutenbier, senior account manager on the derivatives and structured products desk in Amsterdam, said the products give high-net-worth investors a 100% capital guarantee plus 150% participation in the first 25% growth in the index, 70% participation in the next 25% growth and then 50% participation for anything over that.

Europe Neutral, a market neutral hedge fund with EUR45 million under management run by ABN AMRO Asset Management, is considering using total-return swaps and contracts for differences on equities. Dan Jelicic, senior portfolio manager in London, said the number of trades the fund executes has increased because of higher volatility. If trading volumes increase further from current levels it will take the plunge, he explained. However, if trading volumes are less than twice the value of the fund it is not economical to use these instruments because the fund has to pay a financing charge to the arranger. Total-return swaps and CFDs allow the fund to avoid U.K. stamp duty. Jelicic added it would be free to use any derivatives house.

Pioneer Alternative Investment Management plans to launch a convertible arbitrage fund that will use over-the-counter derivatives. Peter Cripwell, cio in Dublin, said the fund will use credit swaps, interest-rate and equity derivatives to isolate the embedded options in convertible bonds. Cripwell declined to give an example of a typical strategy but added, "I have no problem with the manager taking significant positions using derivatives." The fund will execute its derivatives transactions with Deutsche Bank, its prime broker.

Tokyo-based Shinsei Bank, with USD76 billion in assets, plans to set up a derivatives market making department in the coming months, beginning with an interest-rate desk and expanding into equity derivatives, in an effort to boost its capital markets presence. To lead the effort, Shinsei has hired Fujita Hideyuki, an interest-rate derivatives trader at Daiwa Securities in Tokyo, said a market official. Hideyuki, who starts next month, could not be reached.

Tokyo-based Daido Life Investment Trust Management, with over JPY300 billion (USD2.3 billion) under management, is considering investing in equity-linked notes to provide enhanced yield. Ichiro Irii, fund manager, said he will consider purchasing ELNs based on Japanese shares for the trust's convertible bond fund. Price is a key consideration in using these instruments, he continued, declining to elaborate on a timeframe or target price range. Daido, which runs equity and fixed-income portfolios, typically uses Nikko Salomon Smith Barney, Daiwa Securities and the Mizuho Group as brokers.

J.P. Morgan is believed to have jumped into the London interest-rate swaptions market in size last week ahead of expectations that the European Central Bank would trim interest rates at its meeting last Thursday. Over EUR1 billion (USD881 million) of three-month options to enter 10-year interest-rate swaps traded last week, according to market officials. A trader at J.P. Morgan said he is not permitted to comment on market activity.

Macquarie Bank has hired Frank Sutrisno, v.p., local markets fixed-income trader at ING Barings in Hong Kong, as a structurer in the structured products group in Sydney. He started in the new position last week and reports to Gary Vassallo, head of derivatives risk in Sydney. Vassallo said he is looking to build up a team for the bank's structured products group. Vassallo continued that there would be further hiring on the horizon but nothing immediate. He declined to elaborate.

Credit default swap spreads on Olivetti tightened 30 basis points to 130bps last week as traders absorbed the news that its debt was going to be paid down. The debt pay down will come as a result of Pirelli and Edizione Holding acquiring a 23% stake in Olivetti for EUR7 billion (USD6.2 billion). Traders said credit default swap spreads tightened to Thursday from 160bps a week before. Telecom Italia, a sister company, also tightened but by only 10bps to 95bps/105bps.

Market makers last week were entering calendar spreads as a low cost method to gain exposure to a rising euro against the dollar. Thomas Devine, foreign exchange options trader at Dresdner Kleinwort Wasserstein in New York, said a popular trade was to sell one-week euro puts/dollar calls with strikes at around USD0.86 and buy three-week euro calls/dollar puts with strikes at around USD0.895. This allows the trader to gain exposure to a rising euro but not suffer from time decay caused by owning volatility. Time decay plays an important role in these options because the euro is appreciating slowly, he added. The euro appreciated against the dollar to USD0.8806 Wednesday from USD0.8755 the previous Friday. But one-month implied volatility remained stable at around 11.5% during the week.