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CBOE launches basket credit products

The Chicago Board Options Exchange will launch three basket credit event options next week, despite a slow start for its other credit products.

    • Alexander Campbell
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The exchange will list three credit event binary options products on July 31: they will be based on baskets of reference entities from the automobile and construction sectors, and on a basket of high-yield securities. Each will have a notional face value of $100,000; the basket constituents and weighting have not yet been revealed, nor have the exact credit events which would trigger a payout.

The products will pay out on each credit event in the basket, and will continue to trade until every reference entity has suffered a credit event, or until the product expires. Expiry dates have been set for September 2008 and September 2012.

CBOE issued its first exchange-traded credit derivatives last month, but so far has not seen significant demand for the single-name products; nor has Eurex, which was first into the sector earlier this year. But Joe Levin, the exchange's head of products, told Risk last month: "As we anticipated, it's a very slow start. We do get a lot of enquiries, but we haven't done a trade yet."

See: Credit derivatives disappoint

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