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ePaper created 2012-04-20, 15:08:32 | version 1.23.0
43Management Report Münchener Hypothekenbank eG The current (daily) stress scenarios are: >> Changes in legal regulatory requirements: The current in- terest rate curve is completely parallel shifted up and down by 200 base points for every separate currency used. The worst result of the two shifts is used for calculation pur- poses. >> Parallel shifts: The current interest rate curve is completely shifted up and down by 100 base points accross all curren- cies. The worst result of the two shifts is used for calcula- tion purposes. >> Steepening/flattening: The current interest rate curve is rotated in both directions around the 5-year rate as the fixed point. >> Historical simulations: • September 11, 2001 terror attack in New York: Changes seen in market prices between September 10, 2001 and September 24, 2001 – the immediate market reaction to the attack – are played out using the current levels as a base level. • The 2008 crisis in the financial markets: Changes in interest rates seen between September 12, 2008 (last banking day before the collapse of Lehman Brothers) and October 10, 2008 are played out using the current levels. The maximum Value at Risk (VaR) of the Bank’s books (interest and currencies) at a confidence level of 99.5 percent at a ten- day holding period was about € 22 million. The average compa- rable figure noted in the previous year was about € 15 million. Because MünchenerHyp is a trading book institution (only for futures) we use a special application to control potential risks in this area, also on an intraday basis. Furthermore, these trades are also integrated into our normal reporting. MünchenerHyp controls its credit spread risks by calculating the present value of its asset related capital market transactions on a daily basis. Based on the cash flow data generated by the SAP system, the Bank uses its own applications to calculate the Credit Spread VaR, the Credit Spread sensitivities and various credit spread stress scenarios. due to a change in a risk-less rate of interest), and Gamma risk (risk of a change in the option’s Delta due to a change in the price of the underlying security; the option’s Delta therefore describes the change in the value of the option due to the change in the value of the underlying security). The volume of risks assumed is moderate as the Bank generally does not employ options for speculative purposes. Positions are generally entered into on an implied basis due to the debtors’ option rights (for example the right to give legal notice of termination per Art. 489 of the German Civil Code – BGB) and are then hedged. These risks are attentively monitored in the daily risk report and are limited. Currency risk is the term used for risks arising from negative changes in the market value of investments or liabilities that are dependent on currency exchange rates, and which will re- act negatively due to changes in currency exchange rates. MünchenerHyp’s transactions outside Germany are hedged against currency risks to the greatest extent possible and only margins involved in payment of interest can be unhedged. Stock risks are not relevant for MünchenerHyp as our total in- vestments in this asset class amount to less than € 5 million. Market price risks are controlled by determining the present value of all of MünchenerHyp’s transaction on a daily basis. Transactions whose values are established by discounting cash flows are evaluated by the Bank’s SAP inventory control system. A dedicated system is used to set the value of structured trans- actions – mainly interest rate capping agreements, swaptions and individually agreed and legal termination rights agreed. The backbone of our interest risk control operations is the Delta- vector, which is calculated on a daily basis. This figure is deter- mined by the present value of the change incurred per range of maturities when the mid-swap curve is affected by one basis point. Münchener Hypothekenbank uses the value-at-risk fig- ure to identify and limit market risks. Linear as well as non-lin- ear risks are taken into consideration using a Delta-Gamma approach when calculating value at risk. Additionally different stress scenarios are used here to measure the effect of extreme shifts in risk factors and the effects of other risk categories.