Hi, regarding Fixed income markets in particular, someone can explain me how is correlation actually traded? I know via broker i i want go long correlation i must enter into three swaps, i suppose one to go long correlation, and the two to hedge the rate sensitivities of that. Can you help me some more? Thanks, Cactus.

As to correlation, it should be at least between two instruments. How can you long correlation just into one swap deal? as far as i know, there is no correlation trader among pure interest rate derivative products.Does correlation trade happen in credit product? For example, Boeing(plane builder), exxon(oil maker), bp(oil maker),US airline will have stong relationship with each other from the credit view. Maybe we can (long boeing credit vs short exxon credit) vs (long BP vs short us airline), here we can assume that maybe credit relationship between Boeing and exxon will become larger relative to that one between exxon and us ariline? that is my guess. Am I right? QuoteOriginally posted by: CactusHi, regarding Fixed income markets in particular, someone can explain me how is correlation actually traded? I know via broker i i want go long correlation i must enter into three swaps, i suppose one to go long correlation, and the two to hedge the rate sensitivities of that. Can you help me some more? Thanks, Cactus.

In fixed income markets, as I know, correlation trades via brokers is entered via trhee swaps: the first is the proper correlation trade(e.g. I pay Euribor and i receive USLibor in Euro) and the other two are used to hedge the delta of the first (e.g. i pay fixin Euro and I receive fix in $$???)...But I'd like to know more about that....Thanks,Cactus.