Cover story

Hedging the hard way

Quanto options have stung dealers' equity derivatives books after the unexpected spikes in volatility and correlation that followed the Lehman Brothers collapse, while structured product issuers have been hit by plummeting dividend expectations and…

Lehman restructured

The collapse of Lehman Brothers left billions of dollars of structured notes with unhedged exposures, prompting issuers to scramble for new counterparties to restructure trades. Meanwhile, some structured product providers have offered hope to investors…

Gambling on dividends

Dividends have caused sizeable losses for dealers and investors over the past few months, as a precipitous fall in expectations has hit structured product issuers and those who participated in dividend swaps. Mark Pengelly investigates

Rocked by counterparty risk

The demise of Lehman Brothers has triggered fresh concerns about counterparty risk, creating a wave of novations and forcing dealers to think harder about the possibility of another major derivatives counterparty defaulting. Mark Pengelly reports

An agent for change

Arnoud Vossen, the new secretary-general of the Committee of European Banking Supervisors, believes the best way to handle change is to focus on the journey, not the destination. Here, he talks to David Benyon about European supervision in the current…

Lehman Brothers losses loom large

The collapse of Lehman Brothers has shocked investors in structured products. Previously immune to the financial crisis in the immediate markets that surround them, those that bought products from the defunct US investment bank are now contemplating…

O Brothers, where art thou?

The bankruptcy of Lehman Brothers, coming on the back of the conservatorship of Fannie Mae and Freddie Mac, sent market participants rushing to compute their exposures and replace affected hedges. How did the market bear up? By Peter Madigan and Nick…

The price is right for inflation

Inflation is rarely out of the headlines these days, whether it is soaring petrol or gas prices, or the price of staple foods such as bread and rice. And this daily flow of news has heightened awareness among retail and high-net-worth investors of the…

Rising above it?

Merrill Lynch's decision to ditch its collateralised debt obligation portfolio in July has been spun as a brave attempt to draw a line under its structured credit losses. But how good is the deal, and does it represent a template for other firms…

The rates escape

A sudden inversion of the euro interest rate curve in June caught dealers and investors by surprise, causing losses for those that had put on curve steepener trades. Dealers rushed to hedge their short gamma positions, forcing the curve to invert further…

Back in Black

New York-based asset manager BlackRock's buying up of distressed mortgage portfolios - most notably its purchase of UBS's portfolio of subprime and other non-agency securities totalling approximately $22 billion - has been making headlines. What does it…

Credit too hot to handle

Some distributors in Asia are offering first-to-default retail credit notes that give sovereign exposure, signalling a revival of interest in credit. But heavy mark-to-market losses and the use of CDOs as underlying collateral in previous issues have…

Sunk by correlation

Equity derivatives dealers faced a grim picture across global markets earlier this year, with steep rises in correlation and volatility together with a slump in dividend expectations decimating exotic books. How have dealers responded? By Mark Pengelly

The good, the bad and the ugly

Last month saw US asset manager Pimco triple its holding of mortgage debt, UBS sell subprime loan positions worth $22 billion to a new fund managed by BlackRock, and HBOS get the first residential mortgage-backed securitisation issue in nearly a year off…

Prime suspect

Knowing the exact quality of the loans in a securitisation pool is key if investor appetite for mortgage securities is to return. Chris Ames, an asset-backed portfolio manager at Schroders, discusses what's prime, what's not, and what has to happen for…

Clearing the way ahead

The major credit derivatives dealers, along with the Clearing Corporation, are working to develop a central clearing house for over-the-counter credit derivatives trades. How will this initiative work, and are there are any rival schemes in the pipeline?…

Growing ambition

The appointment of Doug Naidus as global co-head of residential mortgage origination and trading at Deutsche Bank is a reflection of how much has changed since the bank bought MortgageIT last year. Here, he talks with Mortgage Risk about the firm's move…

Promising developments

Historically, cross-border mortgage lending has been a limited market with select players offering piecemeal loans to those looking for holiday homes. Now originators are assessing the potential of so-called emerging mortgage markets, where new ventures…