• Sell 2y EURMXN-USDMXN correlation swap at 77% Rationale • EURMXN-USDMXN implied correlations are close to the highest levels since 2007 (see graph 1) • This has been driven by MXN implied volatilities trading at their highest levels relative to EURUSO volatility since the financial crisis, largely a result of concerns regarding the Mexico elections in 2018 (see graph 2) • Since 2007 the highest ly realized correlation is 87% and the lowest is 11%. For 2y the highest is 83% and the lowest is 44%. Whilst current levels of ly and 2y realized correlations are close to their highest levels, 3m realized correlation has fallen from recent highs to now sit close to current strikes (see graphs 3 & 4) • The correlation swap provides a limited loss way of fading elevated MXN volatilities and buying cheap EURUSD volatility, which could perform in the event of rising Italian election and Catalonia independence concerns Graphs Graph 1: EURMXN-USDMXN implied correlation at highs 100% 803£ A -Axe 1- 60% 50% 43% 30% Xs% 2207 2336 2009 — EIAMMUSDPAXN ly implialtorr — EuRfAXISUSL*004 2y impliedear 2010 IOU 2012 2013 2014 2015 2016 2017 Graph 3: 1v realized correlation vs. strike 10014 10% 60% a 20% CS L EURMXN-USOkiltN 1y mat car EuRlAxt4-USDhOtti 3m eel car r -X% 2060 2303 2009 2010 2011 2012 2013 2014 2015 2016 2017 Sources: Deutsche Bonk Bloomberg Finance L.P. Disclaimer: htto://ctiobahnarkets.dts.cominew/content/3045.html From: Martin Zeman Sent: Tuesday, November 28, 2017 12:42 PM To: Paul Barrett Cc: Stewart Oldfield < ; ham Osullivan < Graph 2: MXN vols elevated compared to EURUSO vols 0 -5 -ID -15 -20 -25 • 2007 2008 2013 2010 2011 2012 2013 2014 2315 2016 2017 Eu gt.5O6 WM% ly inwlSd e$ spend EtiRUSD-USINAM iY impied vial spied Graph 4: 2v realized correlation vs. strike >; Xavier Avila Subject: DB FX trade idea: EURZAR-USDZAR correlation swap Paul, 100% 8396 n 60% 2096 \ — EURMXICUSDS1042y mai CO" EURIAX