Medium

Risk
90% Capital
guaranteed
Currency Note on Emerging market Basket
Investment Terms
Issuer Barclays
Notional- $2,721,050
Unit Size-10 notes
CUSIP-06742W208
Underlying- Emerging
Market Currency Basket (
EURINR, EURRUB, EURCNY)
Pricing date- July 7, 2014
Maturity data- June 24,
2016
Max Return-unlimited
Minimum Return- 90%
Issuer Details
Issuer - Barclays
S&P Credit Rating. AAA
Market capitalization 100
Bn
CDS 5y spread 150 bps
Investment underlying opportunity: Emerging market currencies in general are volatile and
reward risky and adventurous investors higher returns. This investment is designed to capture
equally weighted basket appreciation in INR (Indian Rupee), CNY ( Chinese Yuan), RUB (Russian
Rouble) relative to euro. These 3 currencies have depreciated at least by 10% over 2 year period
due to reasons like, Crisis in Ukraine, Indias inflation and growth issues and chinas slowdown in
economy. This has gotten priced into the Currency forward markets. Now there is high probability
for these currencies to start appreciating as India has elected a new government with strong
mandate for economy growth, Russia with great new deals on Natural gas and stronger economy
in china. If due to some reason these currencies flounder the investment is protected beyond 10%
depreciation in the currency.
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0
10
20
30
40
50
60
70
80
90
100
12/15/1998 9/10/2001 6/6/2004 3/3/2007 11/27/2009 8/23/2012
EUR/CNY
EUR/INR
EUR/RUB
Risk Return Dashboard
Expected
Return
3.836 %
Volatility 7.5%
Risk Score 3
Capital
Guaranteed
Yes (90%)
Maximum
Loss
10% of
investment
Performance Measure
Expected
Return
Medium
Market Risk Medium
Issuer Risk Low
Complexity Low
Currency statistics (2y forwards)
EURINR 92.457
EURRUB 54.36
EURCNY 8.68
Structured note investment underlying
Currency forwards suggest a depreciation in
the currency basket.
We think forwards are pricing higher rate of
Depreciation despite strong indicators in favor of
Economic growth.
This will be a good opportunity to capture this
Mispricing in the product.
This note has 2 years to maturity.
The expected return is good. Note
has a payoff similar to
a digital call option and Call option.
This position pays unlimited amount on
the upside with potential to loss
10% of the initial investment . This is a
good investment if the underlying
basket appreciates significantly .At the
Same time it is protected from loses
On the downside beyond 10%
depreciation
Investment Metrics
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-15
-10
-5
0
5
10
15
20
25
30
-30 -20 -10 0 10 20 30
Note Return
Note Return
Note Performance
(Historical)
Note Performance
(Future Stress test)
Return 3.836 % per annum 3.836 per annum
Note Payoff 103.86 103.86
Probability of Gain 93.7 93.7
Risk Score 3 3
Volatility 7.5% 7.5%
Probability of Loss 63.2 63.2
Expected Maturity 24 months 24 months
History does not Repeat but rhymes. This note has returned 3.836% per annum historically
with a probability of gain of 37%. Therefore from a mathematical perspective, this note is most
Certain not to deliver the expected return.
Investment Performance
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-30
-20
-10
0
10
20
30
12/20/19969/16/19996/12/2002 3/8/2005 12/3/20078/29/20105/25/2013
Historical Analysis
Asset
performance
Note Return
Recommendation: Metrics and historical analysis concludes this investment is a not an attractive
investment. Investments on Emerging market stock or currencies in general are risk in nature. This
investment in particular is a safe way to gain exposure to those currencies with a chance to lose 10% on
downside with unlimited upside. In current market environment for an investor this investment will
definitely help to obtain 21.5% per annumwith protection up to a 10% decline in the currency basket.
Pros Cons
Note provides a coupon of 21.5% as
long as note is above initial level and
market performance above 21.5%
appreciation
Note offers exciting opportunistic
exposure to EM currency basket
Note offers a pre packed approach to
combine a Digital call, Out of the
money call and short put.
Note has potential to loss 10% of
invested principal if markets decline
below initial level
Historically this note has lost money
many times
These 3 options are long dated (2Y)
and are illiquid. Therefore volatility
skew and volatility spread becomes
important
Score Card: Reverse Convertible on GMCR
Market Direction (SP 500):
Market Vol (SP 500):
Underlying Direction: (INR)
Underlying Direction: (RUB)
Underlying Direction: (CNY)
Underlying Vol:
Issuer Credit (CDS):
Investor Risk Appetite:
Investment Recommendation
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Disclaimer: This report is prepared by Gatick Global solutions team. This is
not an investment advise.
Contact Details:
Karthik Misra and Chandra S Khandrika for further details and questions
Bearish Bullish
Low High
Bearish Bullish
Low
High
Low High
Low
High
Bearish Bullish
Bearish Bullish