EFTA02716191.pdf

FOR INSTITUTIONAL INVESTORS ONLY. NOT FOR FURTHER DISTRIBUTION. DB Brent Short Volatility II Index October 2014 A Passion to Perform. Deutsche Bank El EFTA_R1_02151765 EFTA02716191  DB Brent Short Volatility II Index Summary ■ Rationale: Historically, on average Brent implied volatility has been higher than subsequent realized volatility. In other words, historically implied volatility has priced at a premium. This may be because of corporate hedging flows. DB Brent Short Volatility Strategy offers investors a simple and convenient vehicle to monetize the implied volatility premium. ■ Description: The DB Brent Short Volatility II strategy aims to capture the differential between implied and realized variance in the Brent crude oil market by systematically selling straddle and subsequently delta hedging these straddles The index is constructed as an equally weighted average of 3 sub-indices, each rolling on different dates in order to minimize path dependency and keep an (almost) constant volatility duration exposure at all times On the relevant quarterly roll date (t_r), each sub-index sells equal number of call and put options Every day the delta position implied by these options is hedged by buying the delta amount of underlying future at market close Profit and loss from each sub index is the sum of; ▪ Product of number of options sold on previous rebalance date and the change in option price from previous day, for each of the call and put • Product of number of options sold, the implied delta position on previous day and the change in underlying future price from previous day ▪ Option prices are calculated using Black-Scholes model using an after cost implied volatility (attic) • Option strike is the closest integer strike to the at the money future price on a quarterly roll date • CrtAC = a t - max(4%* at 0.75%); where at is the volatility calculated using the exchange published option prices Deutsche Bank EFTA_R1_02151766 EFTA02716192  DB Brent Short Volatility II Index Summary ■ Transparent: The strategy is fully transparent as it is based on listed option prices ■ Market Neutral: The strategy is constructed using a basket of options and implies no directional exposure to Brent front month prices ■ Rebalancing: The index is rebalanced every year to provide equal exposure to the 3 sub-indices once a year. The rebalance date is the Brent December contract option expiry date. ■ Embedded Cost: Index cost is embedded in the after cost implied volatility (crtAc) calculation ■ Transparency: Rules-based index with the closing level published on Bloomberg page DBCMBSV2 <index> Deutsche Bank EFTA_R1_02151767 EFTA02716193  I DB Brent Short Volatility II Index Construction Brent Contracts Brent Contracts Brent Contracts (January, April, July, (February, May, August, (March, June, September, October) November) December) Roll Dates ■ 3 business days prior to option expiry of the current contract i Short position in 3-month straddles on the respective Roll Dates + ■ Dynamic delta hedging on the options Hedge by buying delta amount of Brent futures 1 v i Sub Index I Sub Index II Sub Index III Rebalancing ■ Rebalanced to equal weights every year on the option expiry of December contract Deutsche Bank NI EFTA_R1_02151768 EFTA02716194  DB Brent Short Volatility II Performance Analysis Index Returns Year on Year Performance Comparison I Annual Returns for Excess Return Indices DB Brent Short S&P 500 Calendar Year Volatility II 2008 -25.95% -37.00% 2009 83.19% 26.46% 2010 30.65% 15.06% 2011 22.60% 2.11% Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 2012 38.04% 16.00% —DB Brent Short Volatility II —S&P 500 2013 20.22% 32.39% Performance Analysis' 2014 YID 3.50% 3.22% Jan 2008 - Oct 20142 DB Brent Short Volatility II S&P 500 Annualized Return 21.40% 5.98% Annualized Returns 21.4% 6.0% Volatility 12.8% 23.3% Sharpe Ratio 1.87 0.28 Maximum Drawdown -27.2% -52.5% Start Date Jen-08 Dec-07 End Date Dec-08 Mar-09 Max Monthly Consecutive -19.6% -29.6% Loss Start Date Sep-08 Sep-08 End Date Dec-08 Nov-08 Max / Min Returns Rolling 12 Months 83.7% I -25.9% 72.3%! -47.5% Rolling 3 Months 25.8%(-20.6% 40.4% I -40.9% Average Monthly Returns 1.7% 0.7% % Months with Gains 71.6% 64.2% Correlation S&P 500 0.28 1.00 Sots 1 Source Bloomberg. Dfl &en! Short Velabbly II Index has been rotrospecevery calculated and did nal east poet to 04 March 2014 Acoxdingty. the results sheen during the retrospective penods do not reflect actual returns. a Past performance iB rot neoessant, ocheallve of how the Index WO perform in me future It* performance of any WW•StMON product bawl on Me DB &Ml Soren VaklplM II Index hare been loner Man tie Index as a result of foes and I or costs 5 Deutsche Bank 2 Statistics sham are for excess return metes except S&P 500 (SPTRtindexal. *lath is a lout return .100x. Data is as a 14 Oct 2014 EFTA_R1_02151769 EFTA02716195  DB Brent Short Volatility II Monthly Returns 2008 2009 2010 2011 2012 2013 2014 January 1.76% 11A4% 3.76% -0.21% 7.75% 5.47% 1.28% February -4.35% 5.77% 0.72% -0.86% 0.80% 1.80% 2.90% March -3.37% 0.55% 3.43% 2.78% 3.62% 3.74% 0.53% April 1.05% 9.37% 2.62% 3.30% 6.01% -3.33% 0.05% May -1.62% 9.03% 4.29% 4.90% -1.33% 1.02% 4.11% June -1.70% -0.05% 2.95% -1.90% 0.46% 0.63% -0.57% July 0.19% 2.35% 3.07% 3.32% 1.70% 2.30% -0.37% August 0.01% 4.59% 1.71% -0.56% 2.09% -1.37% 0.40% September -7.19% -1.49% 7.28% 0.74% 2.42% 4.55% -2.04% October -6.96% 7.91% 0.46% 7.50% 4.16% 1.77% -2.65% November -0.57% 3.48% 1.31% 3.47% 2.62% -0.43% December -6.34% 10.12% 4.44% 8.68% 2.69% 2.73% Calendar Year -25.95% 83.19% 30.65% 22.60% 38.04% 20.22% 3.50% Kole' I Source BloarMerg OB Brent Bich Volmilily ll Index ha bean reeespeebvery ancormed and did not mist prior to 04 Meters 2014. Arcaterely.In results shown dralrm the relmapective penes% do net Mika actual returns. Past ontomence is nor wearily incicative of how the Index »III venom in Me future The etebertWIC* 01any kweetifenl product Said on Me 08 Breen Shot Vabdstyl nas IVA teen Ian, tell Me Index as a Deutsche Bank a 2 rotor, of fees and /or coos Stet/el/CS sheen we for exceee Mum ificlee. Data rs as of 14 Oct 2014 6 EFTA_R1_02151770 EFTA02716196  Risk Considerations ■ The information contained in this presentation does not provide personal investment advice. You should consult with independent accounting, tax, legal and regulatory counsel regarding such matters as they may apply to your particular circumstances Strategy Risk ■ Commodities are speculative and highly volatile and the risk of loss from investing in financial instruments linked to commodities or commodity indices can be substantial ■ The DB Brent Short Volatility Index shorts Brent volatility. Realized volatility might be much higher than Implied Strikes, leading to a big drawdown in the index. In theory, losses in the index are uncapped. Furthermore, realized volatility might be high and the index might decline at the same time as mainstream investments like DJUBS and SPX are declining. Past Performance ■ An index's performance is unpredictable, and past performance is not indicative of future performance. We give no representation or warranty as to the future performance of any index or investment ■ Some of the indices described herein have very limited performance history Backtesting ■ Backtested, hypothetical or simulated performance results discussed herein have inherent limitations. Unlike actual historical performances, simulated results are achieved by means of the retroactive application of a backtested model itself designed with the benefit of hindsight. Taking into account historical events, the backtesting of performance also differs from actual account performance because an actual investment strategy may be adjusted any time, for any reason, including a response to material, economic or market factors. The backtested performance includes hypothetical results that do not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. Actual results will vary, perhaps materially, from the analysis contained herein Deutsche Bank EFTA_R1_02151771 EFTA02716197  Disclaimer MARKETING MATERIAL THIS MATERIAL IS INTENDED FOR INSTITUTIONAL CUSTOMERS ONLY. 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