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Betting on principal finance

Wall Street firms are asking seasoned traders to set up principal finance groups. These credit structuring businesses can make good money and are a useful way of retaining trading talent and allaying investor concerns.

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First came UBS. Then Deutsche Bank. Now this year Merrill Lynch and Bank of America have followed suit. One by one, some of the leading dealers are creating principal finance units dedicated to using credit derivatives, either as assets in their own right, or as a risk transfer mechanism for portfolios of other assets such as asset-backed securities (ABSs). Profits are often created from the

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