Losses and increasing hedging costs have led many smaller firms to leave the power-reverse dual currency (PRDC) business, say dealers, leaving a rump of major banks operating in the market.
One high-profile withdrawal was AIG’s financial products unit, which sold a $7 billion PRDC book in early 2009. The book was largely absorbed by Deutsche Bank. Deutsche did not respond to requests for comment on the matter.
Issuing and hedging PRDCs for Japanese investors provided dealers with bumper profits