EFTA01375534

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% - to k t et N 1.- St aSS 1> Cee cp. 44,1N s 13 Ov s.:** Current Strike Price of Dec15 Calls on Dispersion . ..11; Average Realized Dispersion (SKS'. EIS(EI, 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: ADM (11.2%) Offer: 2.4% where Final Payout = Notional • max(Average Realized Dispersion — Strike,0) Average Realized Dispersion = Average(absolute value of Individual Dispersion for each Index i) Individual Dispersion for Index i = Final Performance for Index i —Average Performance Average Performance = average (Final Performance for each Index i) Final Performance for Index i = -1) Please let us know when would be a good time to connect. Regards, Daniel CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0071040 CONFIDENTIAL SDNY_GM_00217224 EFTA01375534