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

Trends in VaR constituents Although these data refer only to Mediobanca S.p.A., it is worth stressing thefact that the market risks faced by the other Group companies on their tradingbooks are negligible: for example, bonds held by CheBanca! are not part of thetrading book, and the most significant contributor is Compagnie Monégasque deBanque, whose average VaR reading for the year, again based on a 99%confidence level, was €114,000, with a low of €76,000 and a high of €159,000.The effectiveness of VaR as a risk management instrument is confirmed bythe results of the daily back-testing, which is based on the calculation of impliedprofits and losses. 4 In a scenario where volatility was consistently at high levels,the VaR limit for losses was breached on only one occasion with reference to theaggregate portfolio (compared with four breaches last year, which wereexceptional) and twice for the trading book (as against three times last year). Bothfigures are perfectly in line with the theoretical level of 2-3 breaches perfinancial year implied in a value-at-risk model at 99%. The specific causes of thebreaches were the sharp changes in prices on share and bond markets, especiallyin Italy, which took place when the crisis involving peripheral Eurozone memberstates flared up again and spreads on government bonds widened as aconsequence.4Based on repricing the previous days’ positions using data from the following business day, in order toeliminate intraday trading items.– 183