JP Morgan Chase launches 'equity default swaps'
JP Morgan Chase has developed an 'equity default swap', an equity-triggered derivatives product structured like a credit default swap.
But other bank analysts were sceptical about the product, saying equity default swaps are very similar to traditional digital options. "This is not a new product," said Johan Groothaert, head of structured and investment products within global equity derivatives at Deutsche Bank. "We have seen similar digital deep out-of-the-money puts with knock-in features before."
JP Morgan Chase said the 'equity default swap' name is a proprietary term developed by the bank itself, but hopes the product will catch on in the wider market. "This is a new avenue and has high growth potential – it could quickly develop into a liquid and tradable spread market acting as the equity equivalent of the credit derivatives market," said JP Morgan Chase’s Allen.
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