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Banks in Europe, led by Commerzbank, were seen snatching up receiver swaptions in size last week as prop desks and clients positioned themselves for a European Central Bank interest-rate cut this week. Traders estimated that several billion euros (notional) of receiver swaptions rolled through the market, with Commerzbank said to be behind about EUR1 billion (USD888 million) in trades. Meyrick Chapman, director, derivatives strategy at UBS Warburg, said a EUR1 billion swaption is huge in a market where a EUR200 million deal is noteworthy. Popular trades included buying the right to enter a five-year or 10-year swap in one month or six months. Implied volatility on the option to receive fixed in the five-year swap in a month shot up 100bps to 13.75% Thursday.

One-month U.S. dollar/Brazilian real implied volatility surged last week to 14%/17% from about 11%/14% after the resignation of Argentina's minister of economy and the appointment of a new minister. Speculators and hedgers bought dollar calls/real puts, typically in one- to three- month maturities and struck at-the-money or slightly out-of-the money, according to Anshu Goyal, v.p., Latin American foreign exchange options and forwards trader at Lehman Brothers in New York.

Mehraj Matto, co-head of fund derivatives at BNP Paribas in London, has joined Dresdner Kleinwort Wasserstein as head of fund derivatives. Matto will report to Robin Farrell, head of the alternative investments group in London. Farrell said Dresdner hired Matto to help with preparations to start writing options on the performance of hedge funds. It expects to structure its first hedge fund option within the next couple of months (DW, 3/19). Matto resigned last Monday, is expected to start in a month, and could not be reached for comment.

Mortgage-backed securities players are skeptical about the usefulness of a new futures contract on the Current Mortgage Price Index, launched Friday by the Chicago Board of Trade, arguing that the over-the-counter market already provides sufficient, liquid tools that can also be more closely tied to current production. But according to DW sister publication Bond Week, at least one buysider sees potential for using the contract to make basis plays. Officials at the CBOT did not return repeated calls.

The Financial Accounting Standards Board has made a definitive decision concerning accounting treatment for warrants with a net-share settlement feature--they are to be marked to market. Some market practitioners thought net-share settled warrants were exempt from mark-to-market treatment because of a confusing passage in Statement number 133, the FASB's hedge accounting statement. "In hindsight, we wrote [the passage] badly," said Stephen Young, practice fellow in Norwalk, Conn. Net settlement, for example for an equity call option, is where the option is settled via the holder receiving a quantity of the underlying equal to the intrinsic value of the option upon exercise.

The silence was deafening last week in the dollar/yen options market as vol began retracing after steadily climbing upward for months. With spot off its recent high of JPY125, one-month vol fell to the high 12% region from the mid 13% region, said John Meyer, fx options trader at UBS Warburg in Stamford, Conn. Traders in New York said following the Bank of Japan meeting Monday and the U.S. Federal Open Markets Committee meeting Tuesday, uncertainty was taken out of the market. Demand for bullish dollar options trades against the yen abated for the first time in weeks, the traders added.

Yeoh Hong Nam, Asian currency trader at Standard Chartered in Singapore, has moved to Deutsche Bank in a new position as a general Asian options trader. Nam is responsible for trading currency options on Asian and G-7 currencies. He reports to Rig Karkhanis, head of emerging market currency trading. Deutsche Bank is looking to leverage customer flows and sees a strong future in Asian currency trading, according to a trader close to the firm. Nam could not be reached by press time. Karkhanis declined comment.

General Re Financial Products (Japan) Inc. has hired Rick Puglisi, an interest-rate options trader at Lehman Brothers in Tokyo, as head of fixed income and structured products trading in Tokyo. Puglisi said the move provides a great opportunity, declining further comment.

Bankgesellschaft Berlin plans to use over-the-counter equity call options to structure two guaranteed products aimed at retail investors looking to hedge their downside exposure. Gerald Klein, assistant director in the structured products department in Berlin, said these products are a reply to investors' demands for protection against a market crash while maintaining exposure to indices as part of long-term savings plans.

Asia Financial Holdings, a Hong Kong-based financial holding company with HKD14.25 billion (USD1.8 billion) in assets, plans to start writing covered equity calls in the coming months to generate premium. James Lee, investment analyst, said the company will initially look at using exchange-traded instruments but will consider using over-the-counter derivatives if pricing and liquidity are competitive. Lee believes the strategy will be profitable because upside potential in the U.S. equity market is limited in the near term. The company is talking to Morgan Stanley Dean Witter and Goldman Sachs as potential counterparties. Spokespersons at the securities firms did not return calls.