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Fortis Bank is writing equity call options on a basket of value stocks as part of the structuring of a guaranteed fund it will launch at the end of May. Koen Zoutenbier, senior account manager on the derivatives and structured products desk in Amsterdam, said the options will be six-year average-rate calls on a basket containing ABN AMRO, Vandex, Wereldhave, Société Générale, Volkswagen, DaimlerChrysler, KLM Royal Dutch Airlines,AXA, Dutch State Mines and Respsol YPF. Investors get a cash payout equal to the average closing price of the basket on the last day of the final 13 months. Zoutenbier said the exotic option is cheaper than a plain vanilla call, adding that defensive investors favor this strategy because it spreads the risk. He estimates the notional size of the option position will be approximately EUR25 million (USD22.5 million). Zero-coupon bonds provide the guarantee.

New issues of Japanese barrier knock-in equity-linked products are down by at least 50% this month as a downward lurch in the Nikkei 225 in March left many retail investors deep underwater. One equity derivatives trader estimated JPY100 billion (USD800 million) of Nikkei-linked notes were knocked-in in March, when the market traded down to 11,200. The index closed at 13,973.03 Thursday

Asia Debt Management Ltd., a Hong Kong-based asset management firm that specializes in distressed debt, is looking to expand its use of structured notes. Robert Appleby, managing director, declined to give reasons for the move, citing the proprietary nature of the firm's investment strategy. Asia Debt Management manages USD100 million in distressed debt and also handles USD300 million in passively managed portfolios.

HSBC plans to enter the interbank credit derivatives market in Hong Kong in the next few months to meet growing customer demand, according to an official.

Ensuring liquidity should be the primary goal in negotiating an ISDA Master Agreement (the "Agreement") for smaller, non-rated customers, such as a hedge fund or a middle-market corporation. Often highly leveraged and with little room for error, these customers should focus their efforts when negotiating the Agreement with a dealer on limiting the dealer's opportunity to terminate the Agreement. Unfortunately, however, customers (typically through expensive outside counsel), often instead use up valuable negotiating capital on esoteric legal issues that may only remotely affect a customer's situation.

MBNA Corp. recently entered into a 10-year EUR750 million ($672 million, notional) currency swap with an undisclosed counterparty. Vernon C. Wright, executive v.p. and chief corporate finance officer, said the Wilmington, Del.-based credit card company entered the swap to convert U.S. dollar-denominated receivables into euros. It will pass on the euro swap payments to bond investors that purchased a euro-denominated asset-backed security issued by MBNA, he explained. Wright declined to detail the swap rates. He added that MBNA occasionally uses interest-rate swaps.

Handelsbanken Trading plans to offer interest-rate and credit structured products for the first time and start making markets in credit default swaps. Tony Lindlöf, head of structured products and syndicated loans in Stockholm, said the department would hire structures and transfer existing employees. He declined further comment.

UBS Warburg is structuring a synthetic collateralized debt obligation based on a $2 billion reference pool of Aaa/Aa rated asset-backed securities. The deal, dubbed North Street 2001-3, is unusual as it is one of only a handful of publicly rated synthetic CDOs on a reference pool that is not composed of corporate debt, according to an official familiar with the structure. It could not be determined by press time whether the transaction is intended to remove credit risk from UBS' own balance sheet or if the deal is on behalf of a customer. Calls to UBS officials were not returned.

One-month implied volatility on the Brazilian real/U.S. dollar hit a two-year high last week as the economic turmoil in Argentina continued to affect Brazil. On Wednesday, one-month vol was at 21%, according to James Kennan, v.p., Latin American currency options trading at BNP Paribas in New York. This is the highest Brazilian real vol has traded since April 1999, when Brazil was recovering from its devaluation crisis. In late March one-month vol was at 13.5%.