B&B in the news
Risky Business
Terri Duhon interviewed in The Sunday Times - October 12th 2008
News at Ten
Terri Duhon interviewed on ITN's News at Ten - October 8th 2008
The Monster that ate Wall Street
Terri Duhon interviewed in Newsweek - October 6th 2008
Terri Duhon speaks about the credit crisis on Bloomberg TV
Feb 08, Mar 08 and Sept 08
Derivative thinking, The Financial Times, May 30, 2008: excerpt
Most important of all, JPMorgan's top management had a compelling reason to innovate. At the time, the bank had so many loans on its books that it was finding it expensive to keep doing business: it needed large “rainy day” reserves to protect against the chance of the loans turning sour. Hancock's team believed that if they found a way to sell this “default risk” to somebody else by repackaging the loans into derivatives, then they could persuade the regulators that they did not need to post such big reserves. “They say necessity is the mother of invention,” recalls Andrew Feldstein, a former lawyer who worked with Hancock. “In this case, JPMorgan had a good reason to look at how it handled credit.”
In the late 1990s, men such as Feldstein were trying to develop financial techniques that would turn loans into derivatives they could sell on. They started off doing this on an ad-hoc basis but soon discovered that if they created bundles of derivatives contracts linked to loans, then it was easier to sell these instruments to investors - in the same way that it is easier for banks to sell an investor a stake in a mutual fund than shares in an individual company.
Later generations of bankers would refer to these derivatives bundles by the unwieldy name “synthetic collateral debt obligations”. But JPMorgan christened its brainchild Broad Index Secured Trust Offering - or Bistro. Within a few months, it was feeding a wide range of assets into this financial machine, ranging from corporate debt to student loans, and generating fat profits. “The business we were doing grew exponentially,” recalls Terri Duhon, a young banker from Louisiana who was part of the Bistro team. “We went out and 'Bistro-ed' everything we could.”
Banken blockieren Kreditfutures, Financial Times Deutschland, May 4, 2007: excerpt translated from German
Betsy Mettler, partner at the consultancy B&B Structured Finance, which specializes in credit derivatives, sees opportunities for exchange-listed products. The exchanges however need to be creative. "The products should not simply mirror the non-exchange listed products", emphasizes the consultant, who previously worked in the credit derivative department at JP Morgan.
Innovation: Financial inventors underpin success, The Financial Times, March 26, 2006: excerpt
But the City has also frequently demonstrated its capacity to adapt others’ innovations to its clients’ ends. Terri Duhon, managing partner at B&B Structured Finance, a training and consulting firm, recalls that during the late 1990s US firms such as JP Morgan, where she used to work, moved teams across the Atlantic to London, where they adapted simple structured credit techniques, first developed in the US, for customers as varied as German Sparkassen (state-owned regional savings banks) and Dutch private investors.
“We were taking the basic products and applying them to a larger and more diverse group. As a result, the development of the business really took off in Europe. By 2001-02, it became very obvious that the growth of what we were calling a structured credit market was really centered on the London market.”
Creditflux Inside Guide to Next-Generation Credit Derivatives, Fall 2005: excerpt
Options on CDS: Anu Munshi, vice-president in credit derivatives marketing at JP Morgan in London says that ”investors are increasingly putting on plays on top of their core strategies. As clients have grown more comfortable with trading options they are looking at ways of playing with these strategies," she says, "for example by selling out-of-the-money puts to partly subsidize the cost of buying an at-the-money put. Another example is selling out-of-the-money calls and taking more risk to spread tightening to lower the cost of buying puts." Munshi says that investors are also looking increasingly at strategies that combine options with an underlying credit derivative trade. "We are seeing combined credit default swap and options strategies, such as buying protection and selling an out-of-the-money put," she says. "You cap the upside, but the premium from selling the options partially or wholly offsets the cost of carry from buying protection."
Entrepreneurs Like the Look of Credit Derivatives, The Financial Times, July 11 2005: excerpt
“Lots and lots of investors are asking banks for training in credit derivatives,” echoes Terri Duhon, another veteran of JPMorgan’s credit derivatives business who has established a consultancy and training group, B&B Structured Finance. “But the banks don’t have the capacity to do all that training, except for their very best clients. The exponential growth in the credit derivatives industry has surprised everyone, which has highlighted the need for third party services.”
Excellent trainer and course!