Bonds without Borders: A History of the Eurobond Market

CHAPTER 6 The Derivatives Dash 1990–1995

Allen D. Wheat was born in New Mexico, the son of a career military officer, who had lost money speculating on Wall Street. After graduation Wheat started as a trainee with Chemical Bank in its US retail division. Three years later he took a job at the treasury department of General Foods, in White Plains, New York. At General Foods Wheat worked on hedging the company's interest rate exposures, his first derivatives experience. During an eight-year tenure at the company, he rose to head the group's international treasury before being lured to Bankers Trust in 1982 by a college friend turned headhunter, to build the bank's US swaps business.

‘The money was good and it was an interesting business. We’d done a couple of swaps at General Foods, but the truth is I had not the slightest idea what the other side of the transaction was. Pricing was something I had to learn,' he remembers. ‘If we wanted to price a swap in the early 1980s, we’d use the “Wall Street Journal” as the main point of reference.' He adds: ‘I thought I was going to work with a whole bunch of people in swaps. When I got there I found that the guy who’d been running the swap business was moving over to real estate and I was on my own.'¹

During the 1970s and 1980s Bankers Trust had become an acknowledged leader in risk management under Charles Sanford, later to become Chairman and CEO. Sanford developed a methodology for allocating capital to individual transactions in a ...