Lehman Gets Piece of All the Action

The financial alchemists on Wall Street keep coming up with new and more exotic ways to generate trading profits. A case in point is the rise of something called a preferred-credit derivative swap.

A PCDS is a relatively new financial product that Lehman Brothers(LEH Quote) sells as a trading hedge for investors in an equally new line of hybrid securities that share the characteristics of a stock and a bond.

Lehman is peddling the newfangled derivative to hedge funds and other institutional investors jumping into the fast-growing market for perpetual-trust preferred securities -- a new breed of high-yielding hybrids that enables companies to raise cash without affecting their credit ratings. Not surprisingly, Lehman also is one of the big underwriters of perpetual hybrids. ...