Trade Ideas Buy 1y2y USDJPY FVA at 10.50% Current 2y Implied volatility is at 9.95% Rationale • The USDJPY volatility curve has flattened and reduced over the past year: Implied volatility is around 10% for maturities between ly and 7y, is historically low and carries flat. Hence USDJPY provides interesting entry points to buy forward volatility • Volatility of USDJPY long-dated forwards is extremely low, with changes in forward points often having opposite changes in spot (typical of carry trade dynamics). As a consequence, we view back-end volatility as trading at a premium • Medium term vols (3y-5y) may therefore be more optimal points in the curve. Current 1y2y forward implied is at multiyear lows and negative carry has substantially reduced making it an attractive part of the curve • Finally, holding USDJPY volatility would historically been a good diversifier against tail risk Analysis Forward Volatility Forward Starting Window Implied Volatility Curve vs past / Spot vol curve / 3m&6m realised volatility of the forward <image02.0.png> ly2y Forward Volatility is at the lows and so is vol carry •image01.1.png> <image012.png> Sources; Deutsche Bank, Bloomberg Finance L.P. Disclaimer: http://olobalmorkets.dbcominew/coment/304.5.html <image001.gif> Martin Zeman Director I Key Client Partners Deutsche Bank Wealth Management DB Securities Inc 154-0004 New York. NY, USA el. Mobile Email ly 2y 3y 4y Sy Underlying Window ly 2y 3y 4y 5y 1.0/016 10.1% 10.2% 10.1% 10.2% 10.3% 10.3% 10.4% 10.6% 10.4% 10.8% 11.3% 11.e% 211% Volatility Carry 10.2% 10.5% 11.9% Forward Starting Window ly 7y 3y I 4y W 3 0 -0 ly -0.196 4.1% 4.1% -0.1% 5 2y -0.3% -0.2% .0.214 -0.3% 0.4% 3 r 3y -0.4% 0.4% -0.6% •1.0% .2. 7 t 4y -0.5% -0.8% -1.3% -1.8% D 5y -1.1% 13% CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0089827 CONFIDENTIAL SDNY_GM_00236011 EFTA01387360