A new regulatory world

Portfolio hedging

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At the end of June, some equity derivatives dealers in the UK were expecting the Financial Services Authority (FSA) to deliver a powerful incentive for life insurers to start using more long-dated options, in the form of new guidelines that would have given longer-term hedgers more capital relief. It didn’t happen.

“A week is a long time in life insurance regulation,” said one London-based dealer, speaking in the days after the release of the FSA document. “Buying long-dated options is not as att