Credit default swap (CDS) options on Asian names have emerged on broker screens, with two CDS option trades referenced to Hong Kong conglomerate Hutchison Whampoa trading through brokerage firm Icap in early June.The two $10 million trades were closed with a six-month option to buy five-year protection on Hutchison Whampoa at 125 basis points with a delta strike at 116bp. Five-year credit protection on Hutchison Whampoa is currently trading around 100bp in the interbank market. Bear Stearns, BNP Paribas, JP Morgan Chase and Merrill Lynch were counterparties on the two trades.
“CDS options come naturally as a tool to enhance risk management and allow further product development in that area,” says Emmanuel Ramambason, head of credit trading Asia, at BNP Paribas in Tokyo. “BNP Paribas is quite bullish about this product family; we want to be at the forefront of its start in Asia.”
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