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Decillion Investment Management plans to increase the use of derivatives in a recently launched convertible arbitrage fund by raising capital from external investors. Derek Watson, advisor to the fund in Nyon, Switzerland, said it hopes to raise EUR25 million (USD22.8 million) by year-end and then close the fund when it reaches EUR300 million, which he predicts will be within two years. The fund uses interest-rate swaps, credit default swaps and asset swaps to isolate the equity component of convertible bonds.

Citibank structured the first constant maturity swap in the local Indian market last month, said an official at the bank in Mumbai. One of the largest local corporates entered the swap on the back of a bond issuance as a way to manage interest-rate risk, he said. He declined to name the counterparty or reveal details of the bond. A rival banker said constant maturity swaps have not been executed before in the Indian market because most Indian corporates are too cautious to enter exotic derivatives.

Enron plans to add a tradable precipitation index to its EnronOnline trading system within a month. Bjarne Scheildrop, director of Nordic weather trading in Oslo, said it is adding the index because of demand from energy companies in the region.

An Australian and a U.S. energy company last week entered into what is believed to be the first weather derivative basket option based on four cities in Australia. The payout on the November to March contract, which covers the Australian summer, is capped at USD4 million and was brokered by United Weather in Jersey City, N.J. Philippe Chauvancy, director of United Weather Europe, said the basket option is based on Sydney, Melbourne, Brisbane and Adelaide. He declined to name the counterparties.

Deutsche Bank has hired Gohir Anwar, responsible for derivatives sales to U.K. insurance companies at BNP Paribas in London, and Kevin Corcoran, derivatives sales at Barclays Capital in London, as directors in its relative value group. Both will report to Marzio Keiling, head of the relative value group for northern Europe. Anwar and Corcoran will focus on structured credit product sales to U.K. banks and insurance companies, according to a spokeswoman. She said both of these positions are expansions and reflect Deutsche Bank's strategy to grow its U.K. credit business. She declined further comment. Anwar directed calls to press officers and Corcoran, who has not started yet, could not be reached.

GFI Group has set up a weather derivatives desk in New York to broker plain-vanilla and exotic weather derivatives. Donald Fewer, president and ceo of GFI North America, said the desk started brokering plain-vanilla derivatives, such as heating degree-day and cooling degree-day contracts at the beginning of the month, and plans to add exotics within a year. The exotics would include correlation trades, such as options, which have a temperature trigger but pay out in natural gas, and knock-out and knock-in options.

Sun International Hotels, a Bahamas-based international resort and gaming company, is considering entering an interest-rate swap to convert fixed-interest rates on USD500 million in high-yield debt into a synthetic floating-rate liability. Omar Palacios, director of investor relations in Fort Lauderdale, Fla., explained, "I think right now is a good opportunity because of the steep curve." The company would enter swaps on three bond offerings that carry coupons of 8.75%, 8.68% and 9%. Palacios said it is too early to determine the rates the company would seek to pay and receive in the swap. He added it is likely to be a plain-vanilla swap with a maturity of two-to-five years.

Goldman Sachs will start trading weather derivatives on behalf of customers and on a proprietary basis in the fall, a move that market players say lends investment banking credibility to the growing market in weather risk management. Greg Agran, managing director in New York, told DW the firm decided to set up the department because of a combination of customer demand and improving liquidity. He added that the firm needs to be in the market to offer commodity end users complete risk management products.

Italy's IntesaBci has hired Idriss Nouar, research assistant at French insurance company Sorema in New York, as a weather derivatives trader to jump-start its plans to become a market maker (DW, 7/15). Nouar, who joined the firm last week in New York, is the first of three hires the bank plans to make within the next several weeks. Nouar reports to Richard Turrin, director of structured products in New York. "Idriss has a combination of great knowledge ...and technical degrees in engineering to build us a proprietary system that will give us an edge...and ensure we're not trading with a black box approach," Turrin said. He declined to provide further details on the bank's plans. Nouar referred questions to Turrin.

Lehman Brothers is recommending investors sell puts on stocks they would like to acquire but which they believe are currently overvalued. Paul Lieberman, v.p. of equity derivatives and quantitative research in New York, said investors should sell out-of-the-money puts to earn premium and will be exercised on the options if the price of the underlying falls to more realistic levels.