Derivatives traders are turning to emerging-markets transactions as a more profitable alternative to common swaps.

Investors and big companies are flocking to banks such as J.P. Morgan & Co., Chase Manhattan Corp., Salomon Brothers, ING Barings, and Deutsche Bank AG to buy such contracts as options on emerging-market bonds, swaps protecting against a plunge in Brazilian reals, and instruments that make it possible to buy hard-to-get Russian treasury bills.

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