EFTA00589804.pdf

FOR INSTITUTIONAL INVESTORS ONLY. NOT FOR FURTHER DISTRIBUTION. DB Brent Short Volatility II Index October 2014 1 A Passion to Perform. Deutsche Bank EFTA00589804 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 (etc) ▪ Option strike is the closest integer strike to the at the money future price on a quarterly roll date • a tAC = at — max(4% a , 0.75%); where at is the volatility calculated using the exchange published option prices 2 Deutsche Bank EFTA00589805 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 (otc) calculation ■ Transparency: Rules-based index with the closing level published on Bloomberg page DBCMBSV2 <index> 3 Deutsche Bank EFTA00589806 DB Brent Short Volatility II Index Construction Brent Contracts (January. April. July. October) Roll Dates ■ 3 business days prior to option expiry of the current contract ■ Dynamic delta hedging on the options Brent Contracts (February. May. August. November) Brent Contracts (March. June. September. December) Short position in 3-month straddles on the respective Roll Dates Hedge by buying delta amount of Brent futures Sub Index I Rebalancing ■ Rebalanced to equal weights every year on the option expiry of December contract Sub Index II Sub Index III DB Brent Short Volatility II Deutsche Bank EFTA00589807 Deutsche Bank a DB Brent Short Volatility II Performance Analysis Index Returns 400 300 200 100 0 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Brent Short Volatility II —• 500 —DB Performance Analysis' Jan 2008 - Oct 20142 DB Brent Short Volatility II • 500 Annualized Returns 21.4% 6.0% Volatility 12.8% 23.3% Sharpe Ratio 1.67 0.26 Maximum Drawdown .27.2% -52.5% Stan Date Jan 08 Dec•07 End Date Dec•08 Mar•09 Max Monthly Consecutive Loss •19.6% -29.6% Stan Date Sep•08 Sep•08 End Date Dec•08 Nov-08 Max / Min Returns Rolling 12 Months 83.7% / -25.9% 72.3%!.47.5% Rolling 3 Months 25.8%1.20.6% 40.4%!.40.9% Average Monthly Retums 1.7% 0.7% %Months with Gains 71.6% 64.2% Correlation 500 0.28 1.00 Note: 1 Source: Bloomberg. DB &ant Short Wittig II Index has been retrospectively calculated and did not exist prior lo 04 lAtadi 2014. Accordingly, the results shown during the retrospectiveperiods do not reflect actual returns. Past performance is net necessarily indicative el how the Index will perform in the future. The performance cf any investment product based on the DB &col Short Volatility II kdex have been lower than the Index as a result of lees and for costs 2 Statistics shown are ter excess return incites except. 500 (SPTFkindex>). which is a total return index. Data is as of 14 Ocl 2014 Year on Year Performance Comparison' Calendar Year Annual Returns for Excess Return Indices DB Brent Short Volatility II • 500 2008 -25.95% -37.00% 2009 83A9% 26.46% 2010 30.65% 15.06% 2011 22.60% 2.11% 2012 38.04% 16.00% 2013 20.22% 32.39% 2014 YTD 3.50% 3.22% Annualized Return 21.40% 5.98% EFTA00589808 DB Brent Short Volatility II Monthly Returns 2008 2010 2009 2011 2012 2013 2014 January 1.76% 11.44% 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% Deutsche Bank O Note: 1 Source: Bloomberg. 00 Brent Short Vastiity II Index has been retrospectively calculated and did not exist prior lo 00 March 2014. Accordingly, the results shown during the retrospective periods de not reflect actual returns. Past performance is not recessargy indicative ol how the Index will perform in the future. The performance of any investment product based on the DB Brent Short vdatimy II keex have been lower than the Index as a result of lees and for coals 2 Statistics shown are ter excess return index. Data is as of 14 Oct 2010 6 EFTA00589809 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 7 Deutsche Bank EFTA00589810 Disclaimer MARKETING MATERIAL THIS MATERIAL IS INTENDED FOR INSTITUTIONAL CUSTOMERS ONLY. This material was prepared by personnel in a Sales or Trading function of Deutsche Bank Securities Inc., or one or more other affiliates of Deutsche Bank AG (collectively Deutsche Bank), and is not the product of the Deutsche Bank Research Department. This material is not a research report and is not intended as such, it was not prepared or reviewed by the Deutsche Bank Research Department, and the views expressed herein may differ from those of the Research Department. This material is for our clients' informational purposes and is a general solicitation of derivates business for the purposes of, and to the extent it is subject to, §§ 1.71 and 23.605 of the U.S. Commodity Exchange Act. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any specific action based on this material. 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