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Banco Espirito Santo in Portugal this week launched a Eu1.15bn collateralised debt obligation backed by a portfolio of bonds, credit linked notes and credit default swaps to corporates, financial institutions and public finance entities. Jointly lead managed by Deutsche Bank and Merrill Lynch, the deal was priced almost exactly in line with previous similar Portuguese CDOs, despite the arguably worsening market conditions for this asset class.

The project finance department of Citibank in New York this week launched a $343m securitisation backed by participations in 25 project finance loans originated by Citibank globally. Lead managed by Schroder Salomon Smith Barney (SSSB), Project Securitisation Co 1 Ltd is just the third term securitisation ever to be backed solely by project finance loans, and it is unique in that the majority of its exposure is in emerging market countries.

Alliance UniChem, the international pharmaceutical concern, will today (Friday) launch a £102m securitisation backed by trade receivables. Lead managed by BNP Paribas (BNPP), the deal is the first ABS in this sector outside the commercial paper or private markets. It is also the first UK ABS term deal backed, in part, by receivables from a UK government body.

* Credit Suisse First Boston yesterday (Thursday) launched a Eu60.75m securitisation backed by Belgian real estate leased to the European Union. Confinimmo Lease Finance SA offered a single Eu60.75m tranche rated triple-A by Moody's and Standard & Poor's with a 16.5 year average life at 13bp over six month Euribor. The deal's expected maturity is January 2027, matching the length of the leases, and its legal maturity is July 2027.

HypoVereinsbank yesterday (Thursday) returned for the third time with its Geldilux programme, issuing a Eu1.5bn synthetic collateralised loan obligation (CLO) backed by small and medium sized corporates and private borrowers in Germany. Like its predecessors, Geldilux 2001-1 is a fully funded synthetic CLO designed to transfer credit risk from a revolving reference pool of short term Euroloans originated by the bank's Luxembourg subsidiary to the SPV.

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Several asbestos credits notched up this week, with reportedly more investor comfort now that liability cases have stabilized. Crown Cork & Seal traded at 87.25 to 88.25, up from the mid-80s. Owens Illinois traded at 93.5 to 94.25, up from the 92 range. US Industries traded at 82 to 83, up from the high 70s. Meanwhile, quotes for PacifiCare Health Systems's bank debt have dipped in the wake of a rocky refinancing deal. Levels landed in the 75-85 range from a previous level in the mid 90s.

This is the first article in a two-part series looking at the characteristics and applications of market models, and their advantage over traditional approaches in pricing interest-rate derivatives. This article reviews the literature and covers the relationship between the well-known Heath, Jarrowand Morton(HJM) approach and the market models approach. Next week's Learning Curve will examine application issues, namely the calibration of the market models to caps and swaptions, closed form solutions useful for calibration and pricing of Bermudan options with Monte Carlo in the context of the market models.

Brazil is looking to issue bonds with embedded derivatives to better manage its debt maturity profile and wants banks to pitch such structures to it, according to DW sister publication Emerging Markets Week. If market conditions are favorable the central bank would like to offer more deals with embedded puts, calls and warrants, said officials at the bank.

Credit Suisse First Boston has hired Sam Vulakh, a credit derivatives trader at Bear Stearns in Tokyo, in a similar position. The firm obtained a credit derivatives license for Japan in late March and has been building its operation since then, according to traders familiar with the firm. Vulakh could not be reached and a CSFB spokesman declined to comment.

Ernst & Young plans to hire approximately 20 risk managers to expand its financial services group. Tim Pagett, head of the financial services risk management practice in London, said it aims to bring the risk managers on board over the next 12 months because it anticipates increasing demand in the wake of the proposed Basel Capital Adequacy Accord and a more liquid credit market. He added, "Anybody who works in financial risk department needs to be conversant with all the risks associated with derivatives." There are currently 42 pros in the group.