HSBC 2012 Annual Report Download - page 222

HSBC HOLDINGS PLC
Report of the Directors: Operating and Financial Review (continued)
Risk > Market risk > Trading portfolios / Non-trading portfolios
220
For a description of the parameters used in
calculating VAR, see the ‘Appendix to Risk’ on
p
age 266.
Trading portfolios
(Audited)
Value at risk of the trading portfolios
Our Group trading VAR was as shown below:
Trading value at risk
2012 2011
US$m US$m
At 31 December ....................... 78.8 118.3
Average .................................... 74.2 101.8
Minimum ................................. 47.3 62.2
Maximum ................................. 130.9 143.9
Almost all trading VAR resides within Global
Markets. The VAR for trading activity at
31 December 2012 was lower than at 31 December
2011 due primarily to the reduced contribution of
credit spread exposures to sovereigns. This reduction
was driven by positions being managed down,
together with the lower credit spread volatilities
and baselines in the VAR calculations.
We routinely validate the accuracy of our VAR
models by back-testing the actual daily profit and
loss results, adjusted to remove non-modelled
items such as fees and commissions, against the
corresponding VAR numbers. We expect on average
to see losses in excess of VAR 1% of the time over
a one-year period. The actual number of losses in
excess of VAR over this period can therefore be used
to gauge how well the models are performing. In
2012, there were no exceptions at the Group level.
Daily VAR (trading portfolios) (US$m) Daily revenue
(Unaudited) (Unaudited)
30
60
90
120
150
Jan-12 Mar-12 May-12 Aug-12 Oct-12 Dec-12
2012 2011
US$m US$m
Average daily revenue ................... 31.8 27.3
Standard deviation48 ....................... 22.8 32.3
Ranges of most frequent
– daily revenues ........................ 20 to 30 20 to 30
days days
– daily occurrences ................... 60 41
Days of negative revenue .............. 8 40
Daily distribution of Global Markets’ trading and other trading revenues49
(Unaudited)
2012 2011
Number of days Number of days
2
0
1
0
2
0
3
44
21
4343
60
45
24
5
00
2
0
1
0
5
10
15
20
25
30
35
40
45
50
55
60
65
-60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150
11
4
10
14
27
37
36
41
31
18
11
6
9
33
0
5
2
0
1
0
5
10
15
20
25
30
35
40
45
50
55
60
65
-100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100 130 140
Revenues (US$m) Revenues (US$m)
 Profit and loss frequency  Profit and loss frequency
For footnotes, see page 249.
VAR by risk type for trading activities50
(Audited)
Foreign
exchange and
commodity
Interest
rate
Equity
Credit
spread
Portfolio
diversification51 Total52
US$m US$m US$m US$m US$m US$m
At 31 December 2012 ...... 20.5 37.5 17.7 16.1 (12.9) 78.8
Average ............................. 23.5 42.7 9.3 26.8 (28.1) 74.2
Minimum .......................... 6.9 29.5 2.7 12.2 – 47.3
Maximum .......................... 46.0 60.0 24.9 77.9 – 130.9