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38 münchener Hypothekenbank eg | annual report 2014management report 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 (Theta; is understood to the risk that measures how the passage of time impacts on the value of a derivative instrument), 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 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 – in addition to our investments – our total investments in this asset class amount to less than € 5 million. Market price risks are managed by determining the present val- ue of all of MünchenerHyp’s transaction on a daily basis. Trans- actions 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 con- sideration using a Delta-Gamma approach when calculating val- ue at risk. In addition, different stress scenarios are used here to measure the effect of extreme shifts in risk factors and the effects of other risk categories. The current (daily) stress scenarios are: Legal supervisory requirements: The current interest rate curve is completely parallel shifted up and down by 200 sovereign states banks total Nominal value in € millions 31 Dec. 2014 31 Dec. 2013 31 Dec. 2014 31 Dec. 2013 31 Dec. 2014 31 Dec. 2013 Portugal 60 60 87 127 147 187 Italy 47 97 40 47 137 Ireland 23 23 60 60 83 83 Spain 61 65 610 620 671 685 Total 191 245 757 847 948 1.092 31 Dec. 201431 Dec. 201331 Dec. 201431 Dec. 201331 Dec. 201431 Dec. 2013 Portugal 606087127147187 Italy 47974047137 Ireland 232360608383 Spain 6165610620671685 Total 1912457578479481.092