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Chart 17: SXEP calls would have generated a higher average payoff and more frequent positive returns vs. USO calls (when sized for an upfront cost equal to the current price of the USO 3M 25d put) Avg Payoff Freq of >0 2.1x SXEP 3M 25d calls: 2.9% 27% 1.3x USO 3M 25d calls: 1.4% 10% 60% 50% 40% 30% 20% 10% 0% 08 09 ‘10 M40 ‘12138 141516 SXEP Call Payoff = USO Call Payoff Source: BofA Merrill Lynch Global Research. Data from 1-Jan-16 to 5-Aug-1 6. Backtesting is hypothetical in nature and reflects application of the screen prior to its introduction. It is not intended to be indicative of future performance. Chart 19: Number of bonds purchased by the ECB in their CSPP programme by sector Chart 18: Selling the USO 25d put (~8.7 strike as of 5-Aug) to buy the SXEP 42d call (~280 strike as of 5-Aug) for ~0 provides early upside participation and a ~12% downside buffer on the short USO put leg 300 290 280 270 260 290 240 13 Long SXEP call strike (unlevered implementation) 12 Short USO put strike|_ 9 230 220 7 oo owo ©O©§ 0 © © © © © © © © © © SEESSEEEEEEESS35 SXEP ——USO (rhs) Source: BofA Merrill Lynch Global Research. Data from 1-Jan-16 to 5-Aug-16. Backtesting is hypothetical in nature and reflects application of the screen prior to its introduction. It is not intended to be indicative of future performance. Chart 20: Oil drawdowns have recently coincided with $ weakening 25% 15% 440 m# Bonds Purchased 55% 138 m% of Eligible __. a ° 400 - = { aie 45% 80 o i H | 35% 60 _ ° yt a 1 1 1 Source: BofA Merrill Lynch Global Research. Negative correlation would have helped dampen potential USD losses on the short USO put leg 70% 50% 30% 10% 10% 1 i I -30% saeeter ‘O7 08 09 10 11 12— 13 1415 16 USO vs. EURUSD correlation* Conditional on USO down Source: BofA Merrill Lynch Global Research. Data from 18-Apr-07 to 5-Aug-16. Bankof America Merrill Lynch Global Equity Volatility Insights |O9 August 2016 =-11 HOUSE_OVERSIGHT_025988