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This document is a page from a Bank of America Merrill Lynch 'Global Equity Volatility Insights' report dated August 9, 2016. It contains technical financial analysis regarding 'vega' outstanding and the issuance of structured products linked to the ESTX50 (Euro Stoxx 50) index in Europe and Korea. The document bears a 'HOUSE_OVERSIGHT_025990' Bates stamp, indicating it was part of a document production for a US Congressional investigation (likely related to banking practices), but the specific page content is generic market data and does not name individuals.
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Locations (4)
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Key Quotes (3)
"Current vega outstanding near at least 2.5y high as European Issuance picks up"Source
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Quote #1
"Issuance slowed down due to China sell-off and new local regulations"Source
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Quote #2
"We estimate the current vega outstanding in SX5E-linked products (issued in Europe and Korea) sums up to €143Mn, which is in its 97th percentile since Jan-14"Source
HOUSE_OVERSIGHT_025990.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,336 characters)
Chart 23: European issuance of ESTX50-linked products rose to €9.9bn so far in 2016 (vs €7.2bn as of 4-Jul)
EUR bn
Korea Europe 2016 annualised
Total annualised expected: 20.5
35
30
25
20
15
10
5
0
2013 14.3 1.2
2014 16.6 9.5
2015 12.3 16.7
2016 9.9 3.1
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
EUR bn
Korea Europe 2016 annualised
Total annualised expected: 20.5
35
30
25
20
15
10
5
0
2013 14.3 1.2
2014 16.6 9.5
2015 12.3 16.7
2016 9.9 3.1
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
Chart 24: Issuance of ESTX50-linked structured products in Korea was in line with the 2016 issuance trend
EUR bn
Issuance of SX5E structured products in South Korea
Rapid growth of SX5E products in Korean structured market
Issuance slowed down due to China sell-off and new local regulations
2.5
2.0
1.5
1.0
0.5
0.0
Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16
Source: BofA Merrill Lynch Global Research. Data as of 31-Jul-16
EUR bn
Issuance of SX5E structured products in South Korea
Rapid growth of SX5E products in Korean structured market
Issuance slowed down due to China sell-off and new local regulations
2.5
2.0
1.5
1.0
0.5
0.0
Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16
Source: BofA Merrill Lynch Global Research. Data as of 31-Jul-16
Current vega outstanding near at least 2.5y high as European Issuance picks up
We estimate the current vega outstanding in SX5E-linked products (issued in Europe and Korea) sums up to €143Mn, which is in its 97th percentile since Jan-14 (when our records begin). Moreover, this could rise to as much as €169Mn if the SX5E rallies to 3280 (assuming no net SX5E-linked issuance¹, Chart 25, 26 and Chart 27).
We estimate the current vega outstanding in SX5E-linked products (issued in Europe and Korea) sums up to €143Mn, which is in its 97th percentile since Jan-14 (when our records begin). Moreover, this could rise to as much as €169Mn if the SX5E rallies to 3280 (assuming no net SX5E-linked issuance¹, Chart 25, 26 and Chart 27).
Chart 25: We estimate the current vega outstanding in SX5E-linked structured products is EUR 83Mn (European issuance) and EUR60Mn (Korean issuance)
Vega (Korean issuance)
Vega (European issuance)
Vega (EUR Mn)
Max vega: EUR111mn at ~3400 spot level
Max vega: EUR61mn at ~3000 spot level
Ref. spot = 2932
120
100
80
60
40
20
0
-20
2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000
SX5E spot level
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
Vega (Korean issuance)
Vega (European issuance)
Vega (EUR Mn)
Max vega: EUR111mn at ~3400 spot level
Max vega: EUR61mn at ~3000 spot level
Ref. spot = 2932
120
100
80
60
40
20
0
-20
2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000
SX5E spot level
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
Chart 26: The ESTX50 vega outstanding due to structured products issuance could rise to EUR168Mn, assuming no new net issuance
Vega (Aggregated issuance)
Vega (EUR Mn)
Max vega: EUR168mn at ~3220 spot level
Ref. spot = 2932
180
160
140
120
100
80
60
40
20
0
-20
2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000
SX5E spot level
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
Vega (Aggregated issuance)
Vega (EUR Mn)
Max vega: EUR168mn at ~3220 spot level
Ref. spot = 2932
180
160
140
120
100
80
60
40
20
0
-20
2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000
SX5E spot level
Source: BofA Merrill Lynch Global Research. Data as of 4-Aug-16
¹ i.e. notional of newly issued structured products = notional of expiring structured products
Bank of America Merrill Lynch
Global Equity Volatility Insights | 09 August 2016 13
HOUSE_OVERSIGHT_025990
Global Equity Volatility Insights | 09 August 2016 13
HOUSE_OVERSIGHT_025990
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