EFTA01386774.pdf

From: Martin Zeman Sent: 1/31/2019 8:45:43 AM To: 'Paul Barrett CC: Stewart 0ldfield Subject Market Colour: Flash Crash in USDJPY Realized Volatility... Good color on USDJPY vol post the flashcrash early January: Any guesses on USDJPY Realized Volatility (Daily with WMR fixings) since the Flash Crash? (so first fixing = 4th Jan). 3.87% ! There are good reasons why it's been so low since then. The move meant that a large source of volatility was removed from the market — namely stops from positioning (especially Mrs Watanabe) and stops from barriers. Additionally, very little new positioning seems to have been added since then, at least based on what we see in the options market. The tone from FOMC suggest even more vol could be removed from the market. The two biggest correlations for USDJPY have been between USD yields and the S&P. We are now in a situation where the FOMC wants to support stocks with lower yields, suggesting these two drivers of USDJPY will be pulling in different directions. What's more, the FOMC is going to be less data dependent now, good economic numbers are not going to change their mind until inflation returns. That means data releases will be less volatile events for yields and hence USDJPY. We as a desk have done very well being short USDJPY volswaps, and continue to like that position. Our current volswap bids: 2m: 6.925 bid 3m: 7.125 bid The current 2m realized vol (so including the full impact of the Flash Crash) is only at 6.65%. This was around 5.5% before the Flash Crash. The low 2m Realized in 2018 was 4.28%, and the high (back in March 2018) was 8.57%. The corresponding numbers for 3m are 6.1% (current), 6.0% (pre Flash Crash), 4.75% (2018 low), 8.05% (high in April 2018). Timing is key of course — one might well be tempted to wait for a bid of 7.5 - 8.0 in the 3m volswap, for example, to make it even more obvious. Martin Zeman Director I Institutional Wealth Partners 345 Park Avenue. New York. 10154 IWP products and services ore intended for and available only to sophisticated, experienced investors who Qualify as "Institutional accounts" under FMRA Rule 4522(c)(3), and ore capable of evaluating the investment benefits and risks of, and exercising independent judgment in evaluating and determining whether to enter into, sophisticated trading strategies and financial tronsochons. Transactions ore subject to relevant internal approvals of Deutsche Bonk or Its affiliates prior to execution, and no transaction, idea or opportunity discussed herein may be executed unless you ore o client of Deutsche Bank and of the Institutional Wealth Partners group (MP). Material herein regarding iliVP products, investment ideas and solutions is for discussion purposes only. While brokerage services offered through the IWP Americas desk may include investment recommendations and brokerage advice, IWP does not provide investment management or investment advisory services, and private market opportunities and other products and services available through IWP ore offered only on a non-advisory basis. This COMMuniCOtiOn is confidential and CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0088615 CONFIDENTIAL SDNY_GM_00234799 EFTA01386774