From: Paul Morris Sent: 1/29/2015 2:57:29 PM To: Stewart Oldfield Subject: FW: One idea for diverging policies - calls on global dispersion [CI Classification: Confidential Paul Morris Managing Director Deutsche Bank Private Bank From: Daniel Sabba Sent: Thursday, January 29, 2015 2:54 PM To: Jeffrey E. Cc: Vahe Stepanian; Richard Kahn; Paul Morris Subject: One idea for diverging policies - calls on global dispersion [C] Classification: Confidential Jeffrey, As we look at the world, the enormous dispersion of monetary and fiscal policies is obvious. One transaction we have used in the past to articulate this theme, and it trickling down to equity markets, are calls on dispersion. This is an OTC transaction in which a client pays a premium and receives a payout based on the average realized dispersion across global markets. It is a way to be economically short correlation and long volatility across markets, similarly to outperformance index options. I have plotted the historical ly average realized dispersion between S&P500, EuroStoxx50, Nikkei, EEM and HSCEI to illustrate. Historical Average Realized Dispersion 60,00% 50.00% 40.00% 30.00% 20 00% 10.00% 0.00% / ot •%.° .t.: %.'' :0' Nt‘ vi) %l bv •iv 406. NO Current Strike Prk e of EleciS Calls on Dispersion —1v Average Realized Dispersion (SX5E. HSCEI, NKY„ EEM, SPX) Indicative Transaction Terms: Client buys: European Call on Dispersion, quanto USD Dispersion Basket: SPX, EEM, SXSE, HSCEI, NKY Expiry: 18 Dec 2015 Strike: ATMF (11.2%) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0044033 CONFIDENTIAL SDNY_GM_00190217 EFTA01357454