## MSR Global Fixed Income – Exposure, TV20 Index

Target Volatility Exposure Indices simulate trading a long only position in a futures contract or group of futures contracts. The number of contracts that the index “owns” is determined by an algorithm based on the volatility exhibited by that futures market (or markets) over the previous six months. The algorithm calculates the position size that will most likely deliver the annualized volatility being targeted. Annualized volatility is calculated by multiplying the standard deviation of daily returns by the square root of 252 (the estimated number of trading days in a year). In this case the index simulates the trading of a Global Fixed Income portfolio that allocates its risk (measured by target volatility) equally to a wide variety of government bond futures contracts from the U.S. and Europe with a range of maturities from 2 to 30 years. The entire index targets an annualized volatility of 20%.