
Dealers turn to mid-cap and EM deal-contingent trades
Premiums of more than 25% are attractive to banks battling low vol and increasing competition

With falling foreign exchange volatility and increased competition eating into lucrative deal-contingent hedge revenues, dealers are increasingly looking at medium-sized and emerging market transactions.
The hedges give purchasers protection against FX movements between the announcement of an M&A deal and its completion. Increased competition in this space has seen the price of the hedges slide from 25% of the cost of an equivalent option in 2015 down to as low as 15%.
As a result, dealers are
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