Chart 24: The HSCEI-SPX Dec-18 (18-month) variance swap spread is Chart 25: The long term HSCEI-SPX realized vol spread has been higher back to the lower-end of its 5-year trading range than the current implied corridor variance spread (5%) 98% of the time since 2007 20% 30% 18% 16% 25% 14% 20% 12% ; 10% 1 8% 10% 6% 5 4% Bt 2th 0% 0% Sea SSSASrErEASeeerteeseeset NANO MNT TTH YH eoeee SSSBSSESESERSSRBSEES seeeeeeeeeeeebesg sd OS So eee oon 7 EoO>-S 2 3H = oo a o et = o> = =——— HSCEI - SPX 18-month realized vol ee arlance oprea — — Dec18 Variance Implied: 8% Source: BofA Merrill Lynch Global Research Data as of 2-Jan-12 to 16-Jun-17 weeeee Dect8 70/110% Corridor Variance Implied: 5% 18-month constant maturity variance swap spread is used as a proxy of Dec18 variance swap spread Source: BofA Merrill Lynch Global Research Data as of 2-Jul-O7 to 16-Jun-17 Chart 26: Historical payoff of buying HSCEI-SPX Dec-18 70/110% Table 6: The HSCEI-SPX Dec-18 70/1 10% corridor variance trade corridor variance spread; higher payoffs during 2011-2012 and 2015 has a positive carry with realized vol across most tenors higher sell-offs than the current implied corridor variance swap spread ee HSCEI SPX Spread 1M realized vol 12.1% 4.6% 75% 300,000 3M realized vol 13.7% 6.8% 6.9% 250,000 6M realized vol 14.0% 6.8% 7.2% 200,000 12M realized vol 16.6% 9.7% 6.9% 1 te} 0, Le} 450,000 18M realized vol 20.8% 11.99% 8.8% 100,000 HSCEI - SPX Dec18 70/110% corridor variance offer: 5.0% 50,000 Source: BofA Merrill Lynch Global Research -50,000 Led foe) Lo?) Q ~— N Lee) + ike) ico) G @ 8 Se “ “ Se “ Sa Se SSBB B 53 33533 8 == HSCEI-SPX Dec18 70/1 10% corridor historical payoff (10k vega) Source: BofA Merrill Lynch Global Research Data as of 2-Jul-O7 to 16-Jun-17 forint a Global Equity Volatility Insights | 20 June 2017-17 HOUSE_OVERSIGHT_014988