From: Paul Barrett Sent: 9/22/2017 8:15:40 AM To: Martin Zeman I CC: Vahe Ste•anian Stewart Oldfield I• Xavier Avila ; Joshua Shoshan I; Davide-A Sferrazza Subject: Re: VI FX Trade idea: Time to buy USDJPY FVA? ICI looks interesting. Please clarify how DB looks at these. We assign a S value per point with a linear payout in lyrs time? ISDA required? Paul Paul Barrett On Sep 22, 2017, at 7:57 AM, Martin Zeman < > wrote: Classification: Confidential Good morning, Paul, Not sure you look at FVA stuff, but this one in USDJPY looks good to me. Martin <image003.png> Trade Ideas Buy ly2y USDJPY FVA at 1030% Current 2y Implied volatility is at 9.95% Rationale • <!--lif IsupportLists)--><!--(endifj-->The USDJPY volatility curve has flattened and reduced over the past year: Implied volatility is around 10% for maturities between ly and 7y, is historically low and carries flat. Hence USDJPY provides interesting entry points to buy forward volatility • <!--lif lsupportlists)--><!--(endifj-->Volatility of USDJPY long-dated forwards is extremely low, with changes in forward points often having opposite changes in spot (typical of carry trade dynamics). As a consequence, we view back-end volatility as trading at a premium • <!--lif IsupportLists)--><!--Iendifi-->Medium term vols (3y-5y) may therefore be more optimal points in the curve. Current ly2y forward implied is at multi-year lows and negative carry has substantially reduced making it an attractive part of the curve • <!--(if !supportLists)--><!--Iendifj-->Finally, holding USDJPY volatility would historically been a good diversifier against tail risk Analysis Implied Volatility Curve vs past / Spot vol curve / 3m&6m Forward Volatility CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0089998 CONFIDENTIAL SDNY_GM_00236182 EFTA01387426