HSBC 2008 Annual Report Download - page 245

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increase in total VAR during the second half of 2008,
the overall impact was limited as a result of
managing down the market risk exposures during
this period (see ‘Value at risk of the trading and
non-trading portfolios’ below).
Although the overall VAR limit for the Group
was increased towards the end of 2008, as a result of
the increased market volatility, the limit remained
within the level set in early 2007.
Value at risk of the trading and non-trading
portfolios
The VAR, both trading and non-trading, for the
Group was as follows:
Value at risk
(Audited)
2008 2007
US$m US$m
At 31 December ................. 191.2 70.1
Average .............................. 158.9 65.3
Minimum ........................... 59.8 43.8
Maximum ........................... 287.1 98.1
As a result of improvements in the Group VAR
data collection process during 2008, all entities
within the Group are now aggregated on a historical
simulation basis, reflecting the full diversification
effects across the Group’s VAR. The 2007 VAR
has been adjusted, reducing the total VAR by
US$25.2 million as at 31 December 2007. The
maximum, minimum and average VARs have also
been adjusted on a comparable basis in order to
fairly present the trend.
The daily VAR, both trading and non-trading,
for the Group was as follows:
Daily VAR (trading and non-trading) (US$m)
(Unaudited)
0
50
100
150
200
250
300
350
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08
The major contributor to the trading and non-
trading VAR for the Group was Global Markets.
The histogram to the right illustrates the
frequency of daily revenue arising from Global
Markets’ trading, balance sheet management and
other trading activities.
The average daily revenue earned in 2008 was
US$21.7 million, compared with US$18.7 million
in 2007. The standard deviation of these daily
revenues was US$53.4 million compared with
US$25.3 million in 2007. The standard deviation
measures the variation of daily revenues about the
mean value of those revenues.
An analysis of the frequency distribution of
daily revenue shows that there were 66 days with
negative revenue during 2008 compared with
35 days in 2007. The most frequent result was
a daily revenue of between US$40 million and
US$50 million with 28 occurrences, compared with
between US$20 million and US$30 million with
71 occurrences in 2007.
Daily distribution of Global Markets’ trading,
balance sheet management and other trading
revenues1
(Unaudited)
2008
Number of days
2
01111
0
1
45
32 2
56
8
9
15
20
25 26 26
28
19
11 11
5
7
9
1
4
1 1
0
5
10
15
20
25
30
-180-170-160-150-140-130-120-110-100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
 Profit and loss frequency
2007
Number of days
10 0 21 1 0
3 3
9
15
37
51
71
37
14
9
2021
0
10
20
30
40
50
60
70
80
-110 -100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 130 140 150
 Profit and loss frequency
1 The effect of any month-end adjustments, not attributable to
a specific daily market move, is spread evenly over the days
in the month in question.
For a description of HSBC’s fair value and price
verification controls, see page 163.