[2.000
Term Structure of Forward
swap rates (OIS) in CAD and
USD
0.000
0 3 6 9 12 15 18 21 24 27 30 33 36
—USD —CAD
The limited downside play I like best in USDCAD is buying a 3month expiry 1.10 / 1.13 call spread on
USDCAD but where the short 1.13 call position only exists (knocks-in) if USD trades at 1.17 trades in
the market before the option expires, otherwise the option payoff is the same as a 1.10 call option.
It costs 1% of USD notional. I believe the buyer is well compensated for the knock-in component.
If USDCAD rises to 1.15 the option payout is 5 big figures. If 1.17 trades before expiry the payout is
limited to 3 big figures.
Max loss is premium paid.
We can price other structures to fit the risk tolerance (higher or lower) of clients - let us know
Key Macro Highlights
• The economy clearly lags the US. Dec13 unemployment unexpectedly rose last Friday to 7.2%
• South of the border demand for USDCAD is declining as the US heads towards energy
independence
• Low inflation and weak exports are likely to preclude any rate hikes in 2014
CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 110250
CONFIDENTIAL SDNY_GM_00256434
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