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

Table 1 - Value at risk and expected shortfall of asset structure12 mths toRisk factors 12 mths to 30/6/1130/6/10(€’000) 30/6 Min Max Avg. Avg.Interest rates ................... 30,619 12,244 42,726 18,926 18,644- of which: specific risk 19,861 7,695 28,278 14,335 9,348Share prices ................... 21,566 12,392 37,716 22,176 20,585Exchange rates ................. 6,730 909 7,427 3,366 1,999Inflation ....................... 280 200 979 436 1,566Volatility ....................... 3,987 1,218 4,794 2,528 1,490Diversification effect *........... (14,217) (4,533) (21,057) (12,306) (9,479)TOTAL ......................... 48,685 21,606 71,126 34,691 34,805Expected shortfall……………... 86,166 65,472 88,402 78,270 65,098* Due to mismatches between risk factors.The average expected shortfall 3 was up 20%, from €65.1m to €78.3m,chiefly due to last year’s result being impacted by the sharp changes in volatilitywhich are not accurately reflected in the calculation model based on thehistorical simulation method.Analysis of VaR for the trading book (cf. Table 2 below) overall reflects thetrends witnessed in the various different risk factors at the aggregate level. Theincrease of around 10% in the average data, from €18.1m to €20.1m, compared tothe stability of the aggregate data, is merely the result of the increase in the stockmarket component which in turn was caused by the arbitrage positions onequities referred to above, the overall effect of which is mitigated by the presenceof AFS equity positionsOf the other risk factors, there was an increase in the exchange rates andvolatility components and a reduction in inflation, and although the interest ratecurves’ contribution reflect higher specific risk (up from €6.5m to €10.7m),overall it was down from €17m to €15.6m. The highs and lows for VaR readingswere also less pronounced: the high for the period was just under €40m(compared with over €90m last year), and the low over €11m, compared with just€4.7m in 2009-10. Equally, there was a significant increase in the expectedshortfall,3Average of losses recorded in 1% of the most unfavourable scenarios.384 –