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3 December 2013
US Derivatives Spotlight
The figures below show the simulated P/Ls for 36M and 18M ATM options
under different volatility and spot change scenarios after one-year has passed.
The price sensitivity to spot moves does tend to dominate any volatility P/L.
Also, you can see for the 36M trade that if fixed strike vols and spot are
unchanged then your option loses a fifth of its value due to time decay (the
18M option loses almost half its value in the same situation). A 5% up move in
spot and a 100 bps decline in vol leaves the 36M ATM call option holder
elatively flat.
Figure 25: Simulated PIL of 36M ATM options after 12M !Figure 26: Simulated PI of 18M ATM options after I2M
have pasrxd under different volatility and spot change 'have passed under different volatility and spot change
scenarios (all else held the same) iscenarios (all else held the same}
%Clangs1n Spot %Champs1n Spot
-10% -5% 0% 5% 10% -10% -5% 0% 5% 10%
400 -81% -67% -48% -22% 8% 4.00 -99% -91% 493% -23% 39%
4.50 -79% -65% 45% -20% II% -4.50 -98% -90% 46% -21% 40%
4.00 -77% -63% 42% -17% 13% 4.00 -96% -98% -61% -20% 41%
-3.50 -76% -60% 40% -Id% 16% -350 -97% -87% -62% -18% 42%
-3.00 -74% 49% -37% .11% 19% -3.00 -96% 45% 40% -16% 43%
-2.50 -72% -55% -34% -9% 21% -2.50 -96% -84% -58% -14% 44%
-2.00 -70% -63% -32% -6% 24% -2.00 -95% 42% -66% -12% 45%
-1.50 -68% -62% -29% .3% 27% -1.50 -94% -81% 41% -10% 47%
S -1.00
450
-65%
-63%
48%
46%
-27%
.24%
-1%
2%
29%
32%
T: -1.00
-0.50 92%
-79%
-78%
.61%
49%
-8%
.6%
49%
19%
5
$
0.00 41% 43% -21% 5% 35%
a 0.00 -91% -76% 47% 4% 51%
1
0.50
1.00
1.50
-69%
-57%
42%
-38%
49%
44%
8%
10%
38%
10% A 0.50
1.00
-90%
-89%
-74%
-72%
45%
43%
.3%
-1%
52%
54%
-55% -36% -13% 13% 43% 1.50 -88% -71% 41% I% 56%
2.00 43% -31% -11% 16% 46% 2.00 437% -69% -39% 3% 57%
2.50 -50% 41% 4% 19% 48% 2.50 -86% 47% -37% 5% 60%
3.00 -48% -29% -5% 21% 51% 3.00 -81% -66% -35% 7% 60%
3.50 46% -26% -3% 24% 54% 3.50 -83% -64% -33% 9% 62%
4.00 .41% -24% 0% 27% 57% 4.00 .82% -62% -31% 11% 64%
4.50 -41% -21% 3% 29% 59% 4.50 -81% -80% -29% 13% 66%
5.00 .39% -19% 5% 32% 62% 5.00 -79% -69% -27% 15% 67%
sand oftaorooson sada Owen an
Deutsche Bank Securities Inc. Page 13
CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0055597
CONFIDENTIAL SDNY_GM_00201781
EFTA01365011
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