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, Todd Stevens
, Stewart
Oldfield
, Vahe Stepanian
, Ariane
Dwyer
, "'Richard Kahn"'
Infirm-Images: image004.png; image005.png; image002.jpg
Classification: Confidential
Jeffrey,
We looked into correlation of Jet Fuel with Brent, WTI and heating oil. See the correlation of weekly returns since Jan-
2012 below:
With WTI: 80%
With Brent: 88%
With Heating oil: 82%
Jet Fuel, Heating Oil and Brent Time Series
w, c, id: im
[email protected] 51:3430
Give these results, we priced alternatives in brent and heating oil. Heating oil vols are lower than brent, and therefore the
option premiums below (as a percentage of swap price) are lower for the heating oil structures versus the brent
structures. The prices below work for 1mm gallons/month of heating oil or 24k barrels/month of brent crude.
tI
igDA(ISI)Fit
(September 2010 — September 2015)
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,,cid:
[email protected]
Options on Heating Oil:
Ca116 swap ref 165 cents/gallon
Cal16 APO (Average Price Option) Calls:
Strike / Premium (in cents per gallon)
165: 19.90
175: 15.95
185: 12.70
Premium Payment Date: Trade Date + 2 business days
Transaction Economics:
Terminal Payout for the K strike APO call above will be:
Calculation Periods: 1-Jan-16 to 31-Jan-16; 1-Feb-16 to 29-Feb-16; ; 1-Dec-16 to 31-Dec-16 (12 periods)
Payment Dates: 2 business days after last day of each Calculation Period
For Calculation Period i, DB pays (in USD): Notional * max ( 0, Average Price of Heating Oil Spot Futures in Calculation
Period i — K)
Average Price of Heating Oil Spot Futures in Calculation Period i: Arithmetic average of settlement price of HO1 <comdty>
on all commodity business days during Calculation Period i.
Notional: in gallons / Calculation Period (e.g. 1,000,000 gallons per month)
Premium to be paid by option buyer is the total number of gallons (across all months) * premium/gallon quoted above
Single Asianed call, with Asianing period 1-Jan-16 to 31-Dec-16:
Strike / Premium (in cents per gallon)
165: 18.10
175: 14.15
185: 10.95
Premium Payment Date: Trade Date + 2 business days
Transaction Economics:
Terminal payout for the K strike Asianed call above will be:
Calculation Period: 1-Jan-16 to 31-Dec-16
Payment Date: 2 business days after last day of Calculation Period
DB pays (in USD): Notional * max ( 0, Average Price of Heating Oil Spot Futures in Calculation Period — K)
Average Price of Heating Oil Spot Futures in Calculation Period: Arithmetic average of settlement price of HO1 <comdty>
on all commodity business days during Calculation Period.
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Notional: in gallons (e.g. 12,000,000 gallons)
Brent (CO1) Historical Prices
(September 2010 — September 2015)
,,:cid:
[email protected]
Options on Brent:
Cal16 swap ref: 55.41
Cal16 APO (Average Price Option) Calls:
Strike / Premium
55: $7.83/bbl
60: $5.72/bbl
65: $4.13/bbl
Single Asianed call, with Asianing period 1-Jan-16 to 31-Dec-16:
Strike / Premium
55: $7.15/bbl
60: $5.03/bbl
65: $3.47/bbl
Daniel Sabba
Key Client Partners
Deutsche Bank Securities Inc.
Tel.
Mobile
Email
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