| TRADE IDEAS 01/03/2019 2
Talisman explained
A talisman offers an indexation to the positive realisation
of the ‘absolute dispersion’ over a given strike.
At maturity, for each stock, we calculate the absolute
value of the difference between the stock performance
and the basket performance.
These values are then averaged, giving the ‘absolute
dispersion’.
If the absolute dispersion is above the strike, the
investor receives the outperformance above the
strike level.
Screening criteria
Selection of eurozone companies with foreign
revenues 50%.
Selection of companies with diversified revenue
exposure between the US and China.
Liquidity filter.
Payoff at maturity
Fig. 2: Absolute dispersion is long volatility and
short correlation
Sources: Bloomberg, BNP Paribas. The green arrows indicate an example of stock moves in a sample basket, with the green dotted line indicating the average move. talisman P&L is calculated based on the average absolute stock move relative to the move of an equally weighted basket.
Fig. 3: Sector exposure of the basket
(# number of stocks)
Sources: Bloomberg, BNP Paribas
EQUITY & DERIVATIVES
Under these market conditions we expect greater
stock divergence, resulting in higher absolute
dispersion.
Ticker Name
EL FP Equity EssilorLuxottica SA
MC FP Equity LVMH Moet Hennessy Louis Vuitton SE
ADS GY Equity Adidas AG
FR FP Equity Valeo SA
BMW GY Equity Bayerische Motoren Werke AG
DAI GY Equity Daimler AG
CON GY Equity Continental AG
ABI BB Equity AnheuserBusch InBev SANV
UNA NA Equity Unilever NV
RI FP Equity Pernod Ricard SA
SPM IM Equity Saipem SpA
BBVA SQ Equity Banco Bilbao Vizcaya Argentaria SA
AIR FP Equity Airbus SE
SU FP Equity Schneider Electric SE
NOKIA FH Equity Nokia OYJ
AMS SQ Equity Amadeus IT Group SA
AKZA NA Equity Akzo Nobel NV
DSM NA Equity Koninklijke DSM NV
BAS GY Equity BASF SE
WKL NA Equity Wolters Kluwer NV
Fig. 4: talisman basket
Ankit Gheedia CFA, Equity and Derivatives Strategist, BNP Paribas London Branch
Legal Notice
This document has been written by our Strategist and Economist teams within the BNP Paribas group of companies (collectively “BNPP”); it does not purport to be an exhaustive analysis, and may be subject to conflicts of interest resulting from their interaction with sales and trading
which could affect the objectivity of this report. This document is non-independent research for the purpose of the UK Financial Conduct Authority rules.For the purposes of the recast Markets in Financial Instruments Directive (2014/65/EU) (MiFID II), non-independent research
constitutes a marketing communication. This document is not investment research for the purposes of MiFID II. It has not been prepared in accordance with legal requirements designed to provide the independence of investment research, and is not subject to any prohibition on
dealing ahead of the dissemination of investment research.
The content in this document/communication may also contain “Research” as defined under the MiFID II unbundling rules. If the document/communication contains Research, it is intended for those firms who are either in scope of the MiFID II unbundling rules and have
signed up to one of the BNPP Global Markets Research packages, or firms that are out of scope of the MiFID II unbundling rules and therefore not required to pay for Research under MiFID II. Please note that it is your firm’s responsibility to ensure that you do not view or use the
Research content in this document if your firm has not signed up to one of the BNPP Global Markets Research packages, except where your firm is out of scope of the MiFID II unbundling rules.
STEER is a trade mark of BNPP.
MARKETS 360 is a trade mark of BNP Paribas
This document constitutes a marketing communication and has been prepared by BNPP for, and is directed at, (a) Professional Clients and Eligible
Counterparties as defined by the recast Markets in Financial Instruments Directive (2014/65/EU) (MiFID II), and (b) where relevant, persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005, and at other persons to whom it may lawfully be communicated (together “Relevant Persons”) under the regulations of any relevant jurisdiction. Any investment or investment activity to which this document relates is available only to and will be engaged in only with Relevant Persons. Any person who
is not a Relevant Person should not act or rely on this document or its content.
Securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.
The information and opinions contained in this document have been obtained from, or are based on, public sources believed to be reliable, but there is no guarantee of the accuracy, completeness or fitness for any particular purpose of such information and such information may not have been independently
verified by BNPP or by any person.None of BNPP, any of its subsidiary undertakings or affiliates or its members, directors, officers, agents or employees accepts any responsibility or liability whatsoever or makes any representation or warranty, express or implied, as to the accuracy and completeness of the
information or any opinions based thereon and contained in this document and it should not be relied upon as such.
This document does not constitute or form any part of any offer to sell or issue and is not a solicitation of any offer to purchase any financial instrument, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on, in connection with any contract or investment decision. To the extent
that any transaction is subsequently entered into between the recipient and BNPP, such transaction will be entered into upon such terms as may be agreed by the parties in the relevant documentation.
Information and opinions contained in this document are published for the information of recipients, but are not to be relied upon as authoritative or taken in
substitution for the exercise of judgment by any recipient, are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. In providing this document, BNPP does not offer investment, financial, legal, tax or any other type of advice to, nor has
any fiduciary duties towards, recipients. Any reference to past performance is not indicative of future performance, which may be better or worse than prior results.Any hypothetical, past performance simulations are the result of estimates made by BNPP, as of a given moment, on the basis of parameters,
market conditions, and historical data selected by BNPP, and should not be used as guidance, in any way, of future performance. To the fullest extent permitted by law, no BNPP group company accepts any liability whatsoever (including in negligence) for any direct or consequential loss arising from any
use of or reliance on material contained in this document even where advised of the possibility of such losses. All estimates and opinions included in this document are made as of the date of this document. Unless otherwise indicated in this document there is no intention to update this document.
BNPP may make a market in, or may, as principal or agent, buy or sell securities of any issuer or person mentioned in this document or derivatives thereon.
Prices, yields and other similar information included in this document are included for information purposes however numerous factors will affect market pricing at any particular time, such information may be subject to rapid change and there is no certainty that transactions could be executed at