Playing on correlation

A wide variety of commodity hybrid products have flooded the market this year, as investors have looked to benefit from rising oil prices. But should dealers be structuring these products without a robust commodity derivatives desk? Alexander Campbell reports

Commodities have become a genuine investment alternative over the past year. Faced with falling equity implied volatilities, low interest rates and tight credit spreads, high-net-worth and retail investors have turned to the commodity markets to enhance returns. In particular, a wide variety of hybrid structures have been launched that combine commodities with other assets classes such as equity, interest rates and credit.

Much of the interest has been driven by high oil prices. With the West