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Latest modelling techniques mean rocket scientists at banks can finally get to grips with the age-old problem of credit risk. It means a new lease of life for old portfolio theory and even older maths, as Mark Parsley finds out.

In the week that South Korea sought IMF assistance and Yamaichi announced bankruptcy, it was easy to miss the tiny column inches devoted to Jardine Fleming's flagging results. The latest figures show a continued decline in the Hong Kong-based investment bank's profitability. In the first half of 1997 it made a net profit of $29 million, meaning its contribution to parent Robert Fleming's profits had reached an all-time low of 16% of the Scottish bank's earnings. This is down from 28.8% last year, and well short of the target 25% to 33% Fleming wants.

You ain't seen nothin' yet

Just about anything. China could launch economic warfare against the west, the US could start raising trade barriers against imports, South Korean banks could dump their Russian bonds, the IMF could run out of money, European monetary union could start amidst economic turmoil. Brian Caplen explores the financial shocks waiting to happen.

They are two of Asia's premier fixed-income investors. They are also former investment bankers. Euromoney invited Brian Lippey of Tokai Asia and Albert Cobetto of Prudential Asia to dinner to chat about dressing down in Hong Kong, how it feels to switch to the buy side and which houses have survived the stock market crisis best. Steven Irvine poured the wine and asked the questions.

A crinkle in the English law of security has been more or less ironed out - but don't ask for an opinion on it yet. By Christopher Stoakes.

Following currency devaluations and stock-market crashes, Asia now faces its biggest challenge: a full-blown credit crunch. No big bond issues will be done for the rest of the year, spreads on outstanding bonds have gone haywire and trading has ground to a halt. Local sources of credit have also dried up. Corporate borrowers can expect little help from their bankers; devaluation has blasted a hole in many local banks' balance sheets and they have no money to lend even if they wanted to. Peter Lee reports on the likely shape of things to come.

It's not just Asia's leaders that are in a state of denial. So too are the legions of economists and research analysts working at investment banks and brokerages across Asia. You might have expected some would have called the crisis that has crippled the region in the past six months. But whether because of political sensitivities or the sheer lack of talent in their ranks, Asian researchers failed to spot the impending crash. Steven Irvine reports.

Ranjan Marwah is by no means low profile. One of the first things to catch the eye in his penthouse office is an oil painting of him in an eighteenth century wig, sitting on a horse with his wife beside him. It has the unlikely look of a Mogul emperor painted by Thomas Gainsborough. Marwah is a kind of emperor in his own way. He founded, built and still runs Executive Access, one of Asia's biggest headhunting firms, which derives 72% of its revenues from banking and finance.

Peregrine's still flying

Simon Meadows is known for striking terror into CSFB traders at the bank's Canary Wharf headquarters in London. But this particular Friday morning he is relaxed, smiling and talkative. Perhaps it's because he is about to go scuba diving in Grenada. Or perhaps it's because he can look back on a good year, having added Russia, Lebanon, Turkey, Slovenia, Croatia and Romania to his list of sovereign clients.

The pack of acquisitive admirers circling around Patria Finance, Prague's much respected investment-banking firm, is growing bigger. Komercni Banka, the Czech Republic's biggest bank, made the first approach. Then came international investment banks, with Fleming and Merrill Lynch reputedly among them.