SYCURVE, MOTTO and ISO
Team Latte
Jul 04, 2005

Long before, credit derivatives became popular and huge in market size, Goldman, Sachs & Co., in late 1980s began trading a new family of fixed income derivative products that were options on the spreads between fixed income asset classes.

These new products included SYCURVE options, which were put and call options on the slope of a yield curve; MOTTO options, where were put and call options on the spread between mortgage and Treasury securities; ISO options, which were put and call options on the spread between foreign fixed income securities and other foreign fixed income securities or U.S. Treasury securities and CROSS options, which were put and call options on fixed income securities in which the option's strike price in established in a currency other than the currency in which the underlying securities are denominated.

Besides, the above Goldman, Sachs & Co. developed and started trading a few more spread options, such as DUOP and SPREAD-LOCK options. It is surprising that the market in these options, especially in Asia, did not take off in the mid and late nineties and one reason could be relative stability of the interest rates in this period.

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