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Geschäftsbericht 2015, englisch

münchener Hypothekenbank eg | annual report 2015 management report 38 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 op- tion’s Delta due to a change in the price of the underlying security; the option’s Delta thereby 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 capital market business for speculative pur- poses. Option positions are generally entered into on an implied basis due to the borrower’s option rights (for example, the statutory right of termination per Art. 489 of the German Civil Code – BGB) and are then hedged as needed. These risks are attentively moni- tored in the daily risk report and are limited. Currency risk defines the risk arising from changes in the market value of investments or liabilities 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 are not hedged. Stock risks are not relevant for MünchenerHyp as our total invest- ments in this asset class – in addition to our other investments – amount to less than € 5 million. Market price risks are managed by determining the present value of all of MünchenerHyp’s transactions on a daily basis. Transactions whose values are reduced 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 transactions – mainly interest rate capping agreements, swaptions, as well as legal and individ- ually agreed termination rights. The backbone of our interest risk control operations is the Delta vector, which is calculated on a daily basis. This figure is determined by the present value of the change incurred per range of maturities when the mid-swap curve is af- fected by one basis point. MünchenerHyp uses the value-at-risk (VaR) figure to identify and limit market risks. Linear as well as non- linear risks are taken into consideration using a Delta-Gamma ap- proach when calculating VaR. 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 base points for every separate currency used. The worst result of the two shifts is used for calculation purposes.  Parallel shifts: The current interest rate curve is completely shifted up and down by 100 base points across all currencies. The worst result of the two shifts is used for calculation 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. • The 2008 crisis in the financial markets: Changes in inter- est 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 banking book (interest and currencies) at a confidence level of 99.5 percent at a ten-day holding period in 2015 was just under € 19 million. The average figure was about € 10 million. Due to the fact that 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. No futures deals were conducted in 2015. MünchenerHyp controls its credit spread risks by calculating the present value of its asset-related capital market transactions on a daily basis. The Bank uses various applications to calculate the Credit Spread VaR, the Credit Spread sensitivities and various credit spread stress scenarios. MünchenerHyp uses the VaR figure to identify and limit credit spread risks. The VaR figure is calculated based on historical sim- ulation. The current (daily) credit spread stress scenarios are:  Parallel shifts: All credit spreads are shifted up and down by

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