IRR310313.pdf - Banco Itaú

h) Derivative Financial Instruments
The globalization of the markets in recent years has resulted in a high level of sophistication in the financial
products used. As a result of this process, there has been an increasing demand for derivative financial
instruments to manage market risks, mainly arising from fluctuations in interest and exchange rates,
commodities and other asset prices. Accordingly, ITAU UNIBANCO HOLDING and its subsidiaries operate in
the derivative markets for meeting the growing needs of their clients, as well as carrying out their risk
management policy. Such policy is based on the use of derivative instruments to minimize the risks resulting
from commercial and financial operations.
The derivative financial instruments’ business with clients is carried out after the approval of credit limits. The
process of limit approval takes into consideration potential stress scenarios.
Knowing the client, the sector in which it operates and its risk appetite profile, in addition to providing information
on the risks involved in the transaction and the negotiated conditions, ensures transparency in the relationship
between the parties and the supply of a product that better meets the needs of the client.
The derivative transactions carried out by ITAÚ UNIBANCO HOLDING and its subsidiaries with clients are
neutralized in order to eliminate market risks.
Most derivative contracts traded by the institution with clients in Brazil are swap, forward, option and futures
contracts, which are registered at the BM&FBOVESPA or at the CETIP S.A. OTC Clearing House (CETIP).
Overseas transactions are carried out with futures, forwards (onshore), options and swaps with registration
mainly in the Chicago, New York and London Exchanges. It should be emphasized that there are over-thecounter
operations, but their risks are low as compared to the institutions’ total. Noteworthy is also the fact that
there are no structured operations based on subprime assets and all operations are based on risk factors traded
at stock exchanges.
The main risk factors of the derivatives, assumed at March 31, 2013, were related to the foreign exchange rate,
interest rate, commodities, U.S. dollar coupon, Reference Rate coupon, Libor and variable income. The
management of these and other market risk factors is supported by sophisticated statistical and deterministic
models. Based on this management model, the institution, with the use of transactions involving derivatives, has
been able to optimize the risk-return ratios, even under highly volatile situations.
Most derivatives included in the institution’s portfolio are traded at stock exchanges. The prices disclosed by
stock exchanges are used for these derivatives, except in cases in which the low representativeness of price
due to liquidity of a specific contract is identified. Derivatives typically precified like this are futures contracts.
Likewise, there are other instruments whose quotations (fair prices) are directly disclosed by independent
institutions and which are precified based on this direct information. A great part of the Brazilian government
securities, highly-liquid international (public and private) securities and shares fit into this situation.
For derivatives whose prices are not directly disclosed by stock exchanges, fair prices are obtained by pricing
models which use market information, deducted based on prices disclosed for higher liquidity assets. Interest
and market volatility curves which provide entry data for the models are extracted from those prices. Over- thecounter
derivatives, forward contracts and securities without much liquidity are in this situation.
The total value of margins pledged in guarantee was R$ 5,321,108 (R$ 5,878,502 at March 31, 2012) and was
basically composed of government securities.
Itaú Unibanco Holding S.A. – Complete Financial Statements – Mach 31, 2013 115