Chart 34: The SX5E DED2 future (currently SX5E Dec18 div future) is the Chart 35: The DED2 div future (122.4) is not heavily discounted vs highest in 9-years relative to DED1 BofAML fundamental bottom-up forecasts (only 1.5% upside potential 440 400% versus forecasts) === 0 130 90% ; Saag Bal Rad realised dividends 50 7 =mtie== Dividend future 1302 120 ais Bro | Consensus J 1949 : 70% ‘oS | paauabie BofAML 110 2139 | "0 1163 ie 60% 5 : “ 180 Median £120 5 Fa 90 40% Allo 4 3 Ps < 80 30% x 100 4 4 70 mmm 20% i 99 J 59.1 div 40% «+. pts paid - mame (0% 80 -R aes in 2017 =—O—Current 70 a om 50 Se AA Ee Gre SM ot AS ms SY DED1 DED2 DED3 DED4 DEDS SSSSSSSSSESESES5SSSOSSSESS TENN NNN NON NON ON ON ON ON ON ON ON
Source: BofA Merrill Lynch Global Research. Data from 5-Jun-09 to 5-Jun-17. Historical values of DED1
are fixed at its current level of 116.6 and historical levels of DED2, DED3, DED4 and DED5 are re- Source: BofA Merrill Lynch Global Research. Data as of 2-Jun-17 scaled using historical their historical ratios to DED1 (DED2/DED1, DED3/DED1, DED4/DED1 and
DED5/DED1) as a multiplying factor.
Table 3: Volatility measures of major equity indices in the EMEA region (data as of 02-Jun-17)
Equity
3Mth ATM implied volatilit 10D realised volatili 12Mth-3Mth ATM i-vol spread 3Mth 90-110 skew index
Weekly Weekly Weekly Weekly Weekly
Current change 2Yrpercentile Current change 2Yrpercentile Current change 2Yrpercentile Current change 2Yrpercentile return ESTX50 3.0% 0.4% 0% 6.1% -3.9% 3% 3.6% 0.4% 100% 7.1% 0A% 18% 0.4% FTSE 0.6% 0.4% 4% 4.2% -3.6% 3% 2.8% -0.1% 87% 5.3% 0.4% 2% 0.0% DAX 2.2% 0.7% 0% 7.1% -0,8% 8% 3.8% 0.4% 100% 7.1% 0.6% 22% 1.8% CAC 2.9% 0.3% 0% 6.1% -3.9% 3% 2.7% 0.3% 100% 7.2% 0.2% 18% 0.1% SMI 1.5% 0.1% 4% 6.5% -4.6% 6% 2.1% 0.0% 94% 6.2% 0.1% 19% 0.0% RDXUSD 24.7% 1.2% 14% 21.7% -7.3% 35% 14% -1.0% 80% 4.8% 0.1% 19% -3.3% TOP40 5.19% 1.0% 5% 93% 3.9% 9% 2.3% -0.4% 65% 7.2% 0.5% 15% -2.1% ISE30 9.6% -0.2% 1% 12.9% 0.6% 16% 3.5% -0.1% 86% 6.7% 0.1% 64% 1.4%
Source: BofA Merrill Lynch Global Research
European volatility: Sector snapshot
Table 4: Volatility measures and indicative option prices for major European sector indices (data as of 02-Jun-17)
Bearish — <<<< ------------------e-nnnnnnnenncneanecnenncnnnnens >>>> Bullish
3Mth ATMf implied 3Mth 90%-110% risk Equity
volatility Real vol* 3Mth 95%-85% put spread 3Mth 100%-110% call spread** reversal™* index
Current Current Current price Weekly Max price Weekly Max price™* Weekly
Weekly 2Yr (%of change 2Yr payout (%of change 2Yr payout (%of change 2Yr Weekly
Current change %-ile Current spot) (bps) %-ile ratio spot) (bps) %-ile ratio spot) (bps) %-ile — return
SX3P (Fd&Bv) 0.5% -02% 1% 85% 0.6% -3 1% 7 2.0% -4 1% 49 -0.2% 2 85% 0.6% SX6P (Utils) 1.7% = -0.2% = 1% 0.4% 0.7% -] 1% 13.8 2.3% 3 2% 44 -0.3% 1 100% — -0.2% SX7E (Banks) 23.0% 0.9% 3% 20.9% 9% 8 4% 53 3.6% 12 13% 28 -0.5% -/ 40% — -3.1% $X7P (Banks) 98% 1.2% 12% 14.0% 6% nm 13% 64 3.3% 15 17% 3.0 -0.5% -8 60% — -2.1% SXAP (Auto) 73% = -0.2% 2% 3.5% 3% -] 2% 74 3.1% = 2% 3.2 -0.4% 0 54% 0.9% SXDP (Health) 3.1% -0.6% 2% 86% 0.9% -/ 2% 115 24% -14 2% 4] -0.2% 10 = 82% = 1.6% SXEP (Oil&Gas) 54% =—-0.2% = 1% 2.5% 2% -] 2% 85 2.8% -1 1% 3.6 -0.3% -] 94% — -2.2% SXIP (Insur) 5.1% -03% 2% 86% 1% =2 3% 9.0 2.8% 3 6% 35 -0.5% 3 64% 0.8% SXKP (Telecom) 49% -20% 1% 1.5% 1% -21 1% 94 2.7% -20 1% 37 -0.2% 2 98% — -1.0% SXNP (Indust) 6.1% -0.1% 6% 9.1% 2% 0 14% 83 2.8% =| 6% 3.6 0.0% 2 100% 1.5% SXPP (Basic) 25.1% -04% 5% 8.5% 2.1% -3 6% 48 3.6% “I 9% 28 -0.2% -2 58% — -1.4% SXQP (Prsnl&HH Gds) 3.9% 3.2% 22% 64% 0.9% 34. 21% = 11.2 2.6% 53 25% 38 -0.5% 24 41% = 0.7% SXRP (Retail) 27% 0.1% 7% 78% 0.8% ] 5% 13.2 2.3% 3 6% 44 0.1% 3 96% -0.4% SXTP (Trvl&Lsre) 3.7% -13% 6% 85% 0.9% -18 6% 10.8 2.6% -14 6% 3.9 -0.2% -4 55% = 1.9%
Source: BofA Merrill Lynch Global Research *Real vol = EWMA (Exponentially Weighted Moving Average) volatility, which measures historical price volatility but assigns greater importance to recent returns. Sigma(t)*2 = 0.94*Sigma(t- 1)*2+(1-0.94)*r(t}*2, where r(t) is the return on day t. “Indicative mid prices; strikes as % of forward ***Negative values indicate that the bullish risk reversal takes in a credit.
Bankof America <> ariective Merrill Lynch Global Equity Volatility Insights | 06 June 2017 17
HOUSE_OVERSIGHT_023591