Annual Accounts and Report as at 30 June 2011 Draft - Mediobanca

QUANTITATIVE INFORMATIONThis year has been marked by phases of extreme volatility alternating withperiods of more controlled movements in prices. The financial year began withrelatively high value at risk levels, due to the market shock from the Greek crisis(May 2010). Another widening was seen at end-2010, due to the increasingdifficulties encountered by Ireland and Portugal in cleaning up their finances, butthe culmination of the crisis came in June 2011 and the first months of the newfinancial year, with contagion spreading to all other peripheral EU memberstates, which meant prices for Italian government securities collapsed, and thecrisis spread to stock markets as well.For the third year running the average value at risk for the aggregate, i.e.comprising not just the trading portfolio but also the holdings in equities andbonds classified as available for sale, was well above €30m (€34.7m, comparedwith €34.8m last year, and €34.7m in 2009). This year, however, showed greaterinstability over the twelve months, with the VaR reading at the reporting datelower (€48.7m,compared with €72.1m), the high for the year virtually half thatreported twelve months previously (€71.1m, compared with the exceptional peakof €140m in the final two months of the previous financial year), and a low whichwas a good 50% higher than last year (€21.6m, compared with €14.1m).By individual risk factor, the contribution from interest rate risk remained atthe high levels witnessed last year (the average reading rose from €18.6m to€18.9m), while the contribution from specific risk increased, from €9.3m to€14.3m. This was marked by two factors: the reduction in exposure to peripheralEU member states’ sovereign risk, and the extension in interest rate volatility tocorporate paper as well, in particular that of banks and financial companies. Thecontribution from equities rose from €20.6m to €22.1m, exclusively as a result ofcertain arbitrage positions on securities linked to M&A transactions. The highercontributions from exchange rates and volatility are accounted for respectively bythe increase in foreign exchange positions and positions in options, equity optionsin particular. Meanwhile, the inflation component fell to its lowest levels.180 –