8 • 16 MARKET RISKYen Swiss FrancStep 1. Measure Exposures
- Closing position on December 1, 2003 500,000,000 20,000,000
- Exchange rate on December 1, 2003 ¥130/$1 Swf 1.4/$1
- U.S. $ equivalent position on December 1, 2003 3,846,154 14,285,714
Step 2. Measure Sensitivity
- 1.01 ×current exchange rate ¥131.3 Swf 1.414
- Revalued position in $s 3,808,073 14,144,272
- Delta of position ($s) (measure of sensitivity
to a 1% adverse change in exchange rate, or
row 5 minus row 3) –38,081 –141,442
Step 3. Measure risk of December 1, 2003, closing position using exchange rates
that existed on each of the last 500 days
November 30, 2003 Yen Swiss Franc
- Change in exchange rate (%) on November 30, 2003 0.5% 0.2%
- Risk (delta ×change in exchange rate) –19,040.5 –28,288.4
- Sum of risks –$47,328.9
Step 4. Repeat Step 3 for each of the remaining 499 days
| November 29, 2003 |
|---|
| : |
| April 15, 2002 |
| : |
| : |
| November 30, 2001 |
| : |
| : |
Step 5. Rank days by risk from worst to best
DATE RISK ($)- May 6, 2002 –$105,669
- Jan 27, 2003 –$103,276
Dec 1, 2001 –$ 90,939
:
Nov, 30, 2003 –$ 47,328.9
:
- April 8, 2003 +$ 98,833
- July 28, 2002 +$108,376
Step 6. VAR (25th worst day out of last 500)
VAR –$47,328.9 (November 30, 2003)
Exhibit 8.7. Hypothetical Example of the Historic or Back Simulation Approach Using
Two Currencies as of December 1, 2003.