EFTA01387392.pdf

the dislocation in EM continues and we'd like to offer the below idea that can be traded in a note format and offers a 17-18% annual net coupon. If you don't like Turkey, but would like to see a similar payout structure in Brazil, Mexico, Rubble or a basket or EM currencies, we can price that up as well. this is not principal-protected (client is short an at-expiry knock-in barrier = EKI) but the whole point is that spot, forwards and vol are currently extended and 2 out of 3 (forwards + vol) are likely to come back in the next 12-18 months as political risk in Turkey goes down and inflation dynamics stabilise We have set the final autocall super-high (ATMF = at-the-money-forward) so that if client doesn't get autocalled the likelihood of them receiving the snowball coupon is still relatively high In a note format, the indication we have from WM CRM was that they would give this a 75% LTV. IN PLAIN ENGLISH, THE CLIENT TAKES ADVANTAGE OF A DISLOCATION IN TURKEY, RECEIVES AN ANNUALIZED COUPON OF 17-18%, AND WHEN USDTRY TRADES BELOW 4.75 ON ANY QUARTERLY OBSERVATION, THE TRADE ENDS. THE RISK TO THE CLIENT IS MODELED IN THE MARK-TO-MARKET ANALYSIS BELOW. IF USDTRY NEVER FIXES BELOW 4.75 ON ANY QUARTERLY OBSERVATION AND ENDS UP ABOVE 8.90 IN S YEARS, THE CLIENT INCURS A SIGNIFICANT LOSS (SEE ANALYSIS BELOW.) Refs: USDTRY Spot = 4.75 USDTRY 5y forward = 8.90 Indicative terms: Format Autocallable Swap Tenor 5 years, subject to early autocall Underlying USDTRY FX Rate Observation Dates Quarterly from Trade Date Autocall Barrier ATMS (= initial level as of Trade Date) for first 19 observation dates but ATMF level for last observation date Client pays 3m$LIBOR on a quarterly basis, subject to early autocall Client receives 5.20% x t (t = 1,2....20) if USDTRY < Autocall Barrier (and the swap stops) else 0 on that observation date. If never autocalled Then client is short USDTRY EKI Call Option with Strike = ATMS and EKI = ATMF Scenario Analysis assuming SIONI notional - at yearly intervals* (the analysis is the Nit AI on the leg the client receives and does not include the 3mLihor payments) USDTRY Autocallable Swap MtM as of Trade Trade Date+1y Trade Date+2y Trade Date+3Y Trade Date+4y at Maturity Date 3.00 434,548 2,506,839 4,547,947 6,615,062 8,702,309 10.400,000 3.40 399,115 2,458.923 4.499,751 6,565.840 8,680,736 10.400,000 USDTRY Spot Scenario 3.80 319,582 2,354,432 4,405.681 6,486,303 8,650,596 10,400,000 4.20 138,685 2,101,845 4,255,904 6,405,653 8,635,510 10,400,000 4.60 -290,675 1,665,865 3,880.006 6,327,389 8.732,346 10.400,000 5.00 -968,630 898,766 3,282,830 6,156,333 8,847,394 10,400,000 5.40 -1,764,484 -1,764,484 2449.747 5,569.924 8,721,061 10,400.000 5.80 -2,619,886 -2,619,886 1,394,751 4.607.107 8,247,953 10.400,000 6.20 -3,481,588 -3,481,588 203,379 3,362,585 7,558,745 10,400,000 6.60 -4,297,245 -4,297,245 -1,015,976 1,945,424 6,600,819 10.400,000 7.00 4,968,063 -4,968,063 -2,186,240 480,324 5,346,136 10,400.000 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0089922 CONFIDENTIAL SDNY_GM_00236106 EFTA01387392