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BARRA Pushes Into The Sell-Side

Berkeley, Calif.-based BARRA was developing risk models when many derivatives traders were still in diapers. The firm's equity risk models, which were originally constructed to help institutional investors with long-term investment decisions, have been adapted in recent years to the shorter time frames of equity and fixed-income traders.

All the recent talk about Value-at-Risk seems to have inspired the firm to make a push into the rapidly expanding firm-wide risk modeling market. It recently announced it was starting a new enterprise risk management services unit to help integrate its models and data with third-party software systems. The unit will be run by Aamir Sheikh, a former finance professor at Indiana University who specializes in options and volatility forecasting and has been at BARRA for three years.

BARRA has also named Michael Conners to head its equity trading services group, which sells risk analytics to broker dealers, hedge funds and other trading institutions. As a founder of Agincourt Holdings in the early 1980s, Conners was one of the first traders to practice index arbitrage on the floor of the Chicago Board Options Exchange.

BARRA plans to do more than put its risk models on the desks of middle-office risk managers. It wants to have brokers use the model throughout their far-flung operations-from institutional trading desks all the way down to retail brokers.

The firm is working on a new equity derivatives risk model that allows users to analyze portfolios of options on individual stocks against the underlying securities. It is also putting the finishing touches on a short-term volatility shock model. The concept: since 15 percent of the risk of holding an option portfolio is a result of changes in vola-tility, more accurate estimates of volatility risk would lead to better risk management.

Power Marketing Claims Another Dealer

The trading and marketing departments in the power industry have traditionally been separated by more than the water cooler-they were quite literally worlds apart. V.J. Horgan, the new senior vice president of power marketing and sales at Kansas City-based Aquila Power, is working to change that.

Horgan is one of a number of former energy derivatives dealers who have moved into the power marketing field in recent months. As a group, they are boosting sophistication levels in an arena where risk management issues got short shrift. "Simple commodity markets delineate value as commodity, price and time," she explains. But to succeed in this new deregulated environment, Horgan believes power marketers have to go beyond simply taking on trading risk to the next step: helping their customers with new structured transactions that address bottom-line business issues. "The need to blend commercial and risk-oriented approaches is fundamental," she says.

That means hiring people who have skills in risk management and conventional marketing techniques. To find the right mix, Aquila Power has been building its marketing team with people from the banking community, specialty trading desks and from traditional marketing positions.

Before joining Aquila, Horgan got plenty of experience marketing structured transactions. She spent seven years at Merrill Lynch in structured commodity derivatives, and worked for Bankers Trust for seven years before that in commercial credit.

ABN-AMRO Raids The Exchange Talent Pool

Anyone who thought ABN-AMRO's acquisition binge involved only the Chicago Corp. and Citicorp Futures is missing a few crucial pieces of the puzzle. The bank has also been snapping up other banks and thrifts to build a U.S. franchise, including Chicago's La-Salle Bank and Long Island's European-American Bank. To staff its new empire, the bank recently recruited two top people from the derivatives exchanges-Alger "Duke" Chapman, former chairman of the Chicago Board Options Exchange, and Jack Wigglesworth, chairman of the London International Financial Futures and Options Exchange (LIFFE).

Chapman's new assignment is to build the personal financial services business of ABN-AMRO Chicago's retail bank. What does that have to do with derivatives? Almost nothing. But in his life before the CBOE, Chapman created private banking business for American Express Bank in London. And before that, he spent 15 years in the retail brokerage business, originally with Shearson/Hamil & Co. Chapman, however, will remain chairman of the Risk Management Center, a trade association supporting the efforts of the Chicago financial community.

Wigglesworth, who directed marketing efforts at Citifutures Ltd. and J.P. Morgan Futures, will become chairman of ABN-AMRO Chicago's U.K. subsidiary. There he plans to expand the futures group, develop synergies with the bank's operations in 70 countries and extend the firm's coverage of financial and nonfinancial futures.

  • Domingo Tavella, Ph.D., and John Ennis III have formed Align Risk Analysis, a consultancy geared toward end-users in the market, credit and business risk areas. Tavella formerly worked as head of financial engineering at Integral Development Corp., while Ennis III had founded the Ennis Financial Group in 1986
  • The American Stock Exchange made a number of new derivatives-related appointments. Richard A. Mikaliunas was promoted to senior vice president of capital markets; James J. Baker to vice president of derivatives marketing; Claire P. McGrath to vice president and special counsel of the derivatives legal counsel; and Clifford J. Weber to vice president of new product development

  • Chase Manhattan Bank added three people to its equity derivatives division. Chris Heath has been hired as a trader focusing on equity derivatives on stock indices. He previously worked as a trader with Lehman Brothers. Max Foster has been named vice president of equity derivatives, after serving in a similar capacity at CIBC Wood Gundy. Mike Smith, who previously worked at the law firm Freshfields, has been named a capital markets officer specializing in product applications of non-stock-index equity derivatives.

  • Paribas augmented its swaps team with the addition of Ronan O'Neill and Ugo Loser. O'Neill, previously a director at Swiss Bank Corp., has been named senior swaps trader in charge of sterling and Scandinavian currencies. Loser, formerly an executive director at Goldman Sachs, will trade on Paribas' fixed-income derivatives desk, focusing on quantitative research and analysis.

  • SunGard Capital Markets has named Josie Palazzolo vice president responsible for business development in North America. She previously worked at Sailfish Systems Ltd., serving as head of product development. According to Daljit Saund, senior vice president in charge of global marketing at SunGard, Palazzolo "will become one of our key people in advancing market take-on of Pan-orama in (the North America) region." Panorama is SunGard's flagship risk management product.