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ЗАО «РАЙФФАЙЗЕНБАНК»:

CLIENT’S FLOW OVERVIEW: TRENDS, QUESTIONS, IDEAS

Москва2012год

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2012 flow overview

Wrong-way deals remained corporate customers top-trade All-in costs (CVA, minimum margins) have risen substantially which

may be result of (a) supply-demand shift and/or (b) elasticity of supply

XCCY strategies and cheap usd supply are now scrutinized by mid-range, second tier customers; we expect these strategies to propagate to lower tiers

Additional credit risks brings more complexity to fixed-fee models, dynamic margining is becoming vitally important

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2012 flow overview

The chart visualizes simulation of common business model in wrong way customer business It is easy to see that during relatively calm periods margining costs look negligible against charges Since P/L targets are reset every year it is becoming extremely important to estimate number of

deals (every deal is easily recognized as a jump on the chart above) during tough years and apply correct charges (size of respective jump) – not an easy task

You probably won’t get enough customers ready to short usdrub and rates when markets are volatile; but even if you are lucky enough credit officer may become disappointed

This looks pretty much theoretical

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Classical step-up fixed-fee no margin customer business brings tough choices during volatile years

Fixed-fees models bear substantial risks of incorrect estimation of (a) fx and rates volatility (b) liquidity conditions (c) customer activity

It is becoming increasingly obvious that customer CSAs and collateralized trades are probably most interesting trends in Russian derivatives market

Although we don’t expect that dynamic margining will totally outperform fixed-fee schedules; thus we think that banking institutions will remain major sources of such products for customers while exchange likely will capture small- and mid- banking flows

2012 flow overview