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 start of the financial yearsaw relatively high value at risk levels, due to the fallout on the market of theshockwaves from the Greek crisis which peaked in May 2010. Another wideningwas seen at end-2010, due to the increasing difficulties encountered by Irelandand Portugal in cleaning up their finances, but the culmination came at the end ofthe financial year and beyond, when prices collapsed for Italian governmentsecurities in particular, and the crisis extending 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, €34.8m and€34.7m respectively). However, this year saw greater instability over the twelvemonths. Indeed, against a lower VaR reading at the reporting date (€48.7m,versus €72.1m) and a high that was almost half that recorded the previous year(€71.1m, compared with the exceptional peak of €140m in the final two months ofthe last financial year), the low was a good 50% higher than in the precedingtwelve months (€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 confirms two factors: the reduction in exposure to peripheral EUmember states’ sovereign risk, and the extension in interest rate volatility tocorporate paper as well, in particular that of banks and financial companies debt.The contribution from equities rose from €20.6m to €22.1m, exclusively due toarbitrage positions on securities linked to M&A transactions. The highercontributions from exchange rates and volatility are accounted for by the increasein foreign exchange positions and positions in options, equity options inparticular. Meanwhile, the inflation component fell to its lowest levels.– 383