Skew -axis vs ATM vol x-axis is stretched GRAB <Menu> to Return Buy Y ..SPXSKEW U Index a Rrlog a pi P.. :I I 1— OL t.ar Price Y=-0.059X-4.381 09/24/2013 =NM 09/24/2014 Regression Analysis El Corr. El OMR Local CCV REGRESSION STATISTICS Linear Raw BETA -0.059 ALPHA(Intercept) •4.301 Fr2(Correlation^2) 0.017 R(Correlation) -0.131 Std Bev of Ener 0,534 SW Error of ALPHA 0.359 SW Error of BETA 0.020 t -Test •2.096 • tip, Significance Last T-Value Last P-Value 0.037 -2.030 0.022 Number of Points 10.3 9 .. 1 6 11 . 12 13 • • • 14 1 • • I l ls: • • • 16 1 • • • 17 ' I 1 . 8 X•SPX3M100VOLSVOLIndex Australia 61 2 9777 8600 Brazil 5511 3048 4500 Europe 44 20 7330 7500 Germany 49 69 9204 1210 Hong Kong 852 2977 6000 Japan 81 3 3201 8900 Singapore 65 6212 1000 U.S. 1 212 318 2000 Copyright 2014 Bloomberg Finance L.P. SN 622439 H235-1719-1 24-Sep-14 18.26;34 BST GlIT+1.00 Source: Bloomberg 24-Sep-2014 Renewed interest in Japanese equities ahead of GPIF re-allocation and policy momentum • • • • Trade: A 6m 110% call financed by 6m 90% put has zero net premium (spot ref: 16374) Investors are waiting for the giant Japanese pension funds to re-allocate away from bonds to equities The Abe administration is looking for additional ways to stimulate the economy • Nikkei vols are high and skew is poor -- no easy way to get into the trade, best to do calls vs puts 1-to-1 struck around major technical levels CONFIDENTIAL — PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0 124715 CONFIDENTIAL SDNY_GM_00270899 EFTA01462252