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Management report – münchener Hypothekenbank eg l annual Report 201240 at a moderate level. The Bank completely divested its Greek hold- ings in the previous year. Furthermore, the Bank has stopped making new investments in countries locates on the periphery of eurozone since 2011. Figures shown under “Sovereign states” also include claims against non-government debtors, which are additionally secured by direct and immediate guarantees issued by the respective state, in addition to government bonds or other public-sector bonds. We do not believe that our investments are currently in danger of default. We are of the opinion that the measures taken by individual states, as well as protective mechanisms enacted at EU levels, are appropriate to ensure the repayment of the affected liabilities. In the case of bank bonds, almost all of these bonds are covered bonds so that in this instance it may also be antici pated that they will be repaid as contractually agreed. Among other risks, options involve the following risks: volatility risk (Vega; risk that the value of a derivative instrument will change due to increasing or decreasing volatility), time risk (Theta; time risk measures how passage of time impacts on the value of a derivative instrument when part of the value is deter- mined by the remaining time left until a contract expires), Rho risk (risk associated with a change in the value of the option 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 options are generally not employed in the capi- tal market business for speculative purposes. Option positions are generally entered into on an implied basis due to the debt- ors’ 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 as needed. 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 react 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 invest- ments 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. Transac- tions whose values are established by discounting cash flows are evaluated by the Bank’s SAP inventory control system. A dedi- cated system is used to set the value of structured transactions – mainly interest rate capping agreements, swaptions and legal Sovereign States Banks total Nominal value in € million covered uncovered 31 Dec. 12 31 Dec. 11 31 Dec. 12 31 Dec. 11 31 Dec. 12 31 Dec. 11 31 Dec. 12 31 Dec. 11 Portugal 70 95 147 197 20 20 237 312 Italy 96 97 60 60 0 40 156 197 Ireland 30 30 60 60 0 0 90 90 Greece 0 108 0 0 0 0 0 108 Spain 122 122 700 700 5* 5* 827 827 Total 318 452 967 1.017 25 65 1,310 1,534 * With explicit state guarantee