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Geschäftsbericht 2013, englisch

36 Management report – münchener Hypothekenbank eg l annual report 2013 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 affect- ed liabilities. In the case of bank bonds, all of these bonds are covered bonds so that in this instance we also anticipate 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 (The- ta; time risk measures how passage of time impacts on the value of a derivative instrument when part of the value is determined 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 mod- erate as options are generally not employed in the capital market business for speculative purposes. Option 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 as needed. These risks are attentively monitored in the daily risk report and are limited. Currency risk defines the risk arising from negative changes in the market value of investments or liabilities dependent on cur- rency exchange rates and which will react negatively due to changes in currency exchange rates. MünchenerHyp’s transac- tions outside Germany are hedged against currency risks to the greatest extent possible and only margins involved in payment of interest can be partially 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, as well as legal and individually agreed termination rights. The backbone of our interest risk control operations is the Delta vec- tor, which is calculated on a daily basis. This figure is determined by the present value of the change incurred per range of ma- turities when the mid-swap curve is affected by one basis point. MünchenerHyp uses the value-at-risk figure to identify and limit market risks. Linear as well as non-linear risks are taken into sovereign states banks total Nominal value in € millions covered uncovered 31 Dec. 13 31 Dec. 12 31 Dec. 13 31 Dec. 12 31 Dec. 13 31 Dec. 12 31 Dec. 13 31 Dec. 12 Portugal 60 70 127 147 0 20 187 237 Italy 97 96 40 60 0 0 137 156 Ireland 23 30 60 60 0 0 83 90 Greece 0 0 0 0 0 0 0 0 Spain 65 122 620 700 0 5* 685 827 Total 245 318 847 967 0 25 1,092 1,310 * With explicit state guarantee

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