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Basket options are valuable tools in structuring financial products. A typical basket consists of several weighted underlyings, and the basket spot is given by:

Enron has established a credit derivatives operation in Tokyo to manage internal exposures and to offer credit risk management to its customers. To staff the effortJean-Sebastien Fontaine, analyst, has transferred from Enron's London office and the company has hired Michael Gordon, a credit derivatives trader at Rabobank in Tokyo. Fontaine and Gordon declined comment.

One month euro/dollar implied volatility shot up to 12% Friday from 10.9% Monday after the euro depreciated against the greenback to USD0.8456 from USD0.8587. There was demand for euro calls/dollar puts from traders who feared European Central Bank intervention and traders took profit on euro puts/dollar calls they had bought when the euro was trading in the USD0.90-0.94 range. One trader said euro calls/dollar puts with maturities out to two weeks traded last week with strikes between USD0.8650-USD0.88.

HSBC Asset Management last week bought an equity basket call option to structure a three-year guaranteed fund. Mark Dickson, global head of product development in London, said the call option gives the fund equal exposure to 25 mainly health care and financial services companies in North America, Japan and Europe. The basket includes AstraZeneca, Citigroup and Yamanouchi Pharmaceutical. Dickson said it chose these companies and other components of the basket because they are expected to appreciate as a result of an increase in the percentage of elderly people in the developed world.

Standard Chartered is setting up a credit derivatives operation in Asia and will commence trading within weeks, said Debbie Min, head of structured asset solutions for global markets in Singapore. "We are leveraging off our existing fixed income business to provide further depth to the bank's product capabilities and therefore, tailored solutions it can offer to our customer base." She described the move as part of the bank's overall effort to increase its presence and capabilities in the Asian capital markets.

J.P. Morgan Chase has hired Michael B.W. Cho, head of interest-rate derivatives trading at Standard Chartered in Seoul, in a new position with responsibility for Korean won-denominated bonds and credit products sales and trading. B.J. Kim, J.P. Morgan's head of Korean credit market sales in Seoul, to whom Cho reports, said he is not looking to make further hires. J.P. Morgan set up a Korean credit-related business earlier this year (DW, 3/19).

Gartmore plans to launch a Pacific region and emerging market hedge fund in July that will use equity derivatives. Martin Phipps, head of hedge funds in London, said the vehicle will use over-the-counter and listed derivatives to go long and short equities in the Pacific region and all emerging markets. Phipps anticipates a greater role for futures than OTC derivatives because Gartmore's skill is in stock selection and it is unlikely to want to pay option premiums.

RMB Asset Management has launched an active equity product with an options-based guarantee that the firm believes is the first of its kind in South Africa.

Nationwide Building Society, the largest thrift in the U.K. with GBP60 billion (USD85 billion) in assets, and Yorkshire Building Society, which has over GBP11 billion in assets, are preparing to make their first use of derivatives to remove credit risk from their balance sheets. The plans come on the back of a recent change to legislation that now allows building societies to tap the credit market.