Speaker Title, SAP AG: Risk Management in Context

Name
Speaker Title, SAP AG

1 Risk Management in Context
2 Net Present Value and Value at Risk
3 Liquidity and Gap Analysis
4 Architectural Components
SAP AG2002, TRM, Market Risk Analyzer2
1

0214356)
! "#%$&(')+*-,/.
Globalisierung
Tighter
Tighter regulatory
regulatory framework
framework •Globalization
•Globalization
•• German
German KonTraG
KonTraG // FAS
FAS •Total
Totalreturn
•Total return management
Return Management
management
•• Minimum
Minimum requirements
requirements •Shareholder
•Shareholder
Shareholder value
value management
management
Value
•• ...
... Management
•Consolidation
•Consolidation and
and joint
joint analysis
analysis of
of information
information stemming
stemming from
from
•the
•the various
various company
company divisions
divisions
Portfolio Analyzer Market Risk Analyzer Credit Risk Analyzer

Performance Value at risk

Counterparty risk
Benchmarking
Attribution Duration, exposure,...
Liquidity Limit checks
Netting/collateral
Integrated management and control
2
7
48 :9<;
1435 =
Information from different operative systems, for example
SAP CFM SAP CFM

External systems
Transaction Manager Liquidity Planner
SAP CFM SAP R/3

...
In-House Cash Cash Management
must be evaluated using standard methods
Portfolio Analyzer Market Risk Analyzer Credit Risk Analyzer

Performance Value at risk

Counterparty risk
Benchmarking
Attribution Duration, exposure,...
Liquidity Limit checks
Netting/collateral
Integrated management and control
>?@;9A>? B 5CD

;
Open interfaces for data input Simulated deals

Reporting characteristics Deals/positions • Fictitious deals
• User-defined • Structure • Standard hedge
• Derived from operative system • Cash flows • Planning new deals
• Option components
Trader Asset class ...
Market data
Datafeed
Calculation processes
Scenarios
Market risk Credit risk Performance
VaR Rate
Counterparty
NPV of
exposure
Gap return NPV calculator
Storage of results / reporting structure External price calculators

Portfolio hierarchy
Limit management
3

H?
I2
(JC43; DK
Transaction data Calculation Evaluations
G FF
EE EE F Mark-to-market Company
FF
LEVEL 2
Trading: Interest products
Bal. sheet Non-bal. sheet Sensitivities Portfolio LEVEL 1

Trading: Bonds
LEVEL 1
Trading: Swaps
E E Profit center
Options - Duration
Debts Base portfolio
Bonds/Frankfurt
Base portfolio
Bonds/New York
G
Futures - Convexity Product
Assets - Exposure
.... ....
Crash/stress tests
Yield curve 5 (+) Current. yield curve Yield curve 6 (long -term)
10.0
Risk management
Market parameters/ 9.0
8.0
scenarios 7.0
6.0
5.0
4.0
3.0
NPV
FF
2.0
1M 2Y 4Y 6Y 8Y 10 Y
Current market prices
F
Risk
Flexible scenarios
Matrix scenarios Price calculator
(user exit)
4
H?I JL M4
7A
4N2D ;
Parallel shift
YC 1 (+ 1%) Current YC YC 2 (- 1%)

Non-parallel shift
10.0
9.0
8.0 YC 3 (+) Current YC ZS 4 (-)
7.0
Rotation
6.0 10.0
5.0 9.0
4.0 8.0 YC 5 (+) Current YC YC 6 (long)
3.0 7.0
2.0 6.0 10.0
1M 2Y 4Y 6 Y 8 J 10 J
5.0 9.0
4.0
NPV Yield curve 1: 521.7
8.0
3.0
2.0 7.0
1M 2Y 4Y 6Y 8 J 6.0
10 J
5.0
NPV Yield curve 3: 524.9 4.0
3.0
2.0
Current NPV: 618.1 1M 2Y 4Y 6Y 8Y 10 Y

H?I JO: P

Q RSNTD ;
Combination of two risk factors or risk

Valuation matrix types
Specification of the range and scale

Risk factors: change in interest rate, change in volatility
Generation of matrix points and
worst simulation of changes to NPV
Parallel shift in interest rates
+10 BP case
+5 BP
Determine the most unfavorable
0 BP combination of factors
-5 BP
-10% -5% +/-0% +5% +10%

Change in volatility
5
W?X45 YC 8M@;4H?I J=Z[N2D
;\
Prices Sensitivities
Basis point value
Net present value
Macauley duration
Clean price (incl. accrued interest)
Modified duration
Crash/stress test (NPV, clean
price) Convexity
U Forex exposure
U U
Scenarios for:
U
Yield curves Option greeks
U V
Exchange rates Delta, Gamma, Vega, Rho, ...
Indexes
U
U V
User-defined
U
Securities prices
Beta factor mapping
Rule-based shifts for individual
risk factors
Direct
Key rate duration/convexity
Volatilities
JC4
A @3; DK
Transaction data Calculation Evaluations

FF Historical simulation
FF
EE EE Monte Carlo
FF
Company LEVEL 2
Trading: Interest products
Bal. sheet Non-bal.sheet - Full valuation Portfolio LEVEL 1 LEVEL 1
E E
Trading: Bonds Trading: Swaps
FF
Debts Options - Delta method Profit center Base portfolio Base portfolio
Bonds/Frankfurt Bonds/New York
Assets Futures - Delta/gamma method Product

.... .... Variance/covariance
Backtesting
Historical market No. Date NPV Risk Confid. Risk management

1 Feb 81 483.9 -134.3
parameters 2
3
May 81
Mar 80
524.8
530.6
-93.3
-87.5
1.0%
4 Feb 90 538.9 -79.2

5 Feb 80 543.8 -74.3
6 Feb 74 546.8 -71.3 2.5%
7 Jun 82 557.5 -60.6
]]
8 May 83 559.8 -58.3
9 Oct 72 560.5 -57.7 50
10 Feb 94 562.6 -55.5 45
11 May 79 564.2 -53.9 40
12 Oct 79 565.5 -52.6
]]
Market interest rates 13
••
Feb 85
••
569.1
••
-49.0
••
5.0%
••
35
30
Exchange rates ••
••
••
••
••
••
••
••
••
••
••
••
••
••
••
25
20
]
15
Stock prices 10
Volatilities 0
< -95
< -85
<-75
< -65
< -55
<-45
<-35
<-25
<-15
< 500
<5
< 15
< 25
< 35
< 45
< 55
< 65
< 75
< 85
<-5
Correlations Price calculator

(user exit)
6
A @5 D
;
Risk factors
Interest rates Currencies Volatilities Stocks/indexes
% $
User-defined
risk factors
?
4^? D1X

Defining the risk hierarchy and evaluation structure
Consolidation Consolidation Consolidation ...
LEVEL Risk factors LEVEL 1 LEVEL 2
3-month FIBOR DEM
6-month FIBOR DEM Money market DEM
12-
12- month FIBOR DEM
Interest DEM
1-year FIBOR DEM
Capital market DEM
3-year FIBOR DEM
SAP Stock Stocks

USD Spot
Currencies Currency
GBP Spot
3-month LIBOR GBP

Interest GBP
6-month LIBOR GBP
Interest
1-year Swap USD
Swap USD
1-year Swap USD
7
J_^?
; DN2 `4C
;
Historical
market prices
Historical market
price changes
Parameters
Current
Holding period market prices
Historical period Historical simulation

Start of historical Valuation of delta Exact position
positions valuation
period
Portfolio Valuation of delta and Product-specific

gamma positions valuation
hierarchy
Risk hierarchy Simulated

gains/losses
VaR
VaR
Confidence level consolidation
level
J_a;
@3;4N2 `@C
;
Simulated
market prices
Parameters Simulated market

price changes
Holding period Current
market prices
Normal distrib.
algorithm
Monte Carlo simulation
Starting value Valuation of delta Exact position
positions valuation
Number of
simulation runs Valuation of delta and Product-specific
gamma positions valuation
Portfolio
hierarchy Simulated
gains/losses
Risk hierarchy
VaR
Confidence level
VaR
consolidation
level
8
J_N2 `@C
;:KK; D1
Simulated changes Changes to present Distribution of

to risk factors values of positions position changes
USD
interest
rate Frequency
∆ Present value
EUR/USD
Confidence
interval
Risk Opportunity
Delta/Gamma
DowJones
VaR
1 2 3 4 Position
N2 `@C
M431Y
;@A @5 D
;
6 months 12 months 2 years DEM/USD
8.000% 1.5000
7.500%
1.4500
Changes in market prices are either
Interest rates in percent
7.000%
determined on the basis of historical
data or generated using Monte Carlo
6.500% 1.4000
Rate in DEM
6.000%
5.500%
1.3500
simulation:
5.000% 1.3000 • Yield curves
4.500%
1.2500 • Exchange rates
4.000%
3.500% 1.2000
• Stocks/commodities/index prices
Day 109
Day 129
Day 139
Day 149
Day 159
Day 169
Day 179
Day 189
Day 199
Day 9
Day 19
Day 29
Day 49
Day 59
Day 69
Day 79
Day 89
Day 99
Day 119
31.07.95
Day 39
• Volatility curves
Simulation scenarios
Relative exchange rate changes (in %)
DEM/USD
2.000% Calculation of relative price changes:

1.500%
∆ price
1.000%
0.500%
0.000% Scenario price

-0.500%
= Current price * (1 + ∆ price)
-1.000%
-1.500%
-2.000%
Day 101
Day 111
Day 121
Day 131
Day 141
Day 151
Day 161
Day 171
Day 181
Day 191
Day 1
Day 11
Day 21
Day 31
Day 41
Day 51
Day 61
Day 71
Day 81
Day 91
Simulation scenarios
9
31 Y
;4I2
(J) Cb;c9AI2;
;
Gains and losses resulting from changes to interest rates

Simulated position changes
19
• per simulation scenario
17
15
• per portfolio
13 • per consolidation level
(risk hierarchy)
Day
11 Portfolio 2 (bond)
Portfolio 1 (cap)
9
-0.500 -0.400 -0.300 -0.200 -0.100 0.000 0.100 0.200 0.300 0.400
Gain/Loss
Simulated position changes:
NPV of position (current market data) – NPV of position (scenario price)

or
Position delta * Scenario price change
or
2
Position delta * Scenario price change + 0.5 Position gamma * Scenario price change
31 Y
;4I2
(J) Cb;c9AI2;
;
Base portfolio 1 • Per risk factor

N
N
Risk Market • For each portfolio level
Risk Market price
price gain/
gain/ ...
...
Risk
Risk ++Market
change priceloss
changeprice
Market gain/
loss
gain/
• Gains/losses listed
22
Risk
Risk ++Market
Änderung
Änderung
Market priceVerl
price Verl..
gain/
gain/ • Calculation of VaR
++Market
change 11
Risk
Risk Market priceloss
changeprice gain/
loss
gain/
++ change
change loss
loss
• 6-month DEM
• 12-month DEM NN
• 24-month DEM Risk
Risk Market
Market price
price gain/
gain/ ...
• Interest DEM ...
Risk
Risk ++Market
change
changepriceloss
gain/
loss
• DEM/USD •6 Mon DEM Market price gain/ 22
• Market risk Risk
Risk Mon DEM++Market
change
changepricelossgain/
loss
DEM Market price gain/
•12
Base portfolio 2 •24•6Mon
MonDEM 11
N
N Risk
Risk
•12
•Zinsen Mon DEM++Market
DEM
change
Market priceloss
changeprice gain/
loss
gain/
Risk Market •24•6Mon
Mon DEM
DEM ++ change loss
Risk Market price
price gain/
gain/ ...
...
•DEM/USD
•12 Mon
•Zinsen DEMDEM change loss
++Market
change •24• 6Mon
-month
•Marktrisiko DEMDEM
Risk
Risk Market priceloss
changeprice gain/
loss
gain/ 22
•DEM/USD
• 12-month
DEM DEM
+
•Zinsen
•Marktrisiko
Risk
Risk ++Market
change
Market priceloss
changeprice gain/
loss
gain/
• 24-month DEM
•DEM/USD
• Interest DEM
Risk Market
++ change price gain/ 11 •Marktrisiko
Risk changepriceloss
Market gain/
loss • DEM/USD
++ change
change loss
loss • Market risk
• 6-month DEM
• 12-month DEM Aggregation
• 24-month DEM
• Interest DEM
• DEM/USD
• Market risk
10
7
d C
;4;X9AI2;
;431 Y
Position
Positionchanges
changesper
perprice
pricescenario
scenario
2.5
Position change in million EUR
2.0
1.5 Value at risk
1.5 m EUR
1.0 with 95% frequency
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
5% 15% 25% 35% 45% 55% 65% 75% 85% 95%
Cumulated frequency (%)

J_3D Ce

;
Simulated
Simulated distribution
distribution
1 0.12
0.9
0.1
0.8
0.7
Cumulated frequency
0.08
0.6
Frequency
0.5 0.06
0.4
0.04
0.3
95%
0.2
0.02
0.1
0 0
3.00 2.60 2.20 1.80 1.40 1.00 0.60 0.20 -0.20 -0.60 -1.00 -1.40 -1.80 -2.20 -2.60 -3.00
Gains Losses
11
J_3D Ce
;
Symmetrical
Symmetrical distribution
distribution
1 0.09
0.9 0.08
0.8
0.07
0.7
Cumulated frequency
0.06
0.6
0.05
Frequency
0.5
0.04
0.4
0.03
0.3
0.02
0.2
0.1
0
3.00 2.60 2.20 1.80 1.40 1.00
95%
0.60 0.20 -0.20 -0.60 -1.00 -1.40 -1.80 -2.20 -2.60 -3.00
0.01
Gains Losses
J_3D Ce

;
Parametric
Parametric distribution
distribution
1 0.12
0.9
0.1
0.8
Cumulated frequency
0.7
0.08
Frequency
0.6
0.5 0.06
0.4
0.04
0.3
0.2
0.1
0
95% 0
0.02
3.00 2.60 2.20 1.80 1.40 1.00 0.60 0.20 -0.20 -0.60 -1.00 -1.40 -1.80 -2.20 -2.60 -3.00
Gains Losses
12
N2 `@C
; PI2;M CD
aN2K D 9g DJC
;
Floaters
Delta
Delta Gains and losses
Bonds
method
method
Historical
Historical/ /
Monte
MonteCarlo
Carlo
Plain options simulation
Portfolio
Delta-gamma
Delta-gamma simulation
Portfolio based
basedonon
method
method gains
gainsand
and
losses
losses
Exotic
options Full
Fullvaluation
valuation
Calculation
Calculation
of
of gainsand
gains andlosses
losses
f
SAP AG
J Dchi3A;XB+ D)K K;D 1
Delta/ Holding Confidence Loss

Volatility of
gamma potential
risk factors period level
position (VaR)
Delta/gamma- Value Position Frequency Present value

position
Confidence
interval
1 2 3 4 t0 t1 t0 t1 Time
Position Time Time Risk Opportunity
10t
Example
EUR 5 million x 0.15 x √ (10:1) x 1.65 = EUR 3,913,318.60
13
J Dchi3A;XB+ DJ) OK 45D
;
Frequency
VaR per risk factor
≈ 68 %
VaR
≈ 90 %
2 * standard
deviation
2 * 1.65 * standard dev.
≈5 % ≈5 %
Change in value
-0.235 -0.142 0 0.142 0.235
[million EUR]
* 1.65
VaR (per risk factor)

Position delta * Volatility * Confidence level
J Dchi3A;XB+ DJ) j)Y YY

;
Risk factor
relationships
(correlations) VaR/risk factor VaR/risk factor VaR/risk factor
DAX
t0 t1 Time t0 t1 Time t0 t1 Time
Interest DowJones
rate USD
Aggregated VaR
EUR/USD SAP pref. VaR/Market risk
Time
t0 t1
14
8D

Y
t1 t2
Market data P1 P2
unchanged
Portfolio in t 1
portfolio as at t1
Original
NPV for changed
NPV for market
market data in t2
data in t1
Value at risk Difference
Comparison

15
l Khm nC M
o
Position data Calculation Risk measurement

F
EE
Bal. sheet Non-bal. sheetE F
Fixed-interest positions/
maturities k
Surplus
E Assets
Debts
Forward
transactions EE Liquidity analyses
Risk per flexible
time bucket
.... Options
Futures E
....
Assets
Risk Management
Fictitious deals
Liabilities
FF k
Surplus
Company
FF
Risk per flexible
Portfolio time bucket
Profit center
Product
I2; DM CP l K)(
Gap
Gapanalysis
analysis
Assets
Positions and maturities
Liabilities Fixed interest rate/capital
Cash flows and liquidity

Surplus
Flexible time bucket definition
Display and transaction currency
Hedge rate
Delta weighting of options
16
prqsutwvqyxz|{+}~{+}y}}z}{+
Cash flows (capital commitment)

Variable interest payments from forwards
Prepayments/rollovers
Accumulated cash flows
Cash flows split into interest rate and instalment
Other operative cash flows (manual entry)
Daily valuation
≥ 1 day)
Flexible time buckets (≥
Currency blocks
N2 `@C
;4I2;D
Maturity Maturity
bands scenarios
Store
results
Actual
positions
Standard simulation,

Calculation
fictitious hedges
Gap analysis
Liquidity
NPV
P&L
P&L results
Time
17
N2 `@C
;4I2;D P3; `@K;

Market scenarios Maturity bands
Yield curves (several Flexible time bucket
possible per currency)

Exchange rates
definition
User-defined
Volatilities
Stock prices
combination of daily,
monthly or yearly
Index prices
buckets
User-defined intervals
Relative or absolute
Update mode

Maturity scenarios Scenario progressions
Balance maturity Date Scenario
Relative or absolute
Core amount
04/09/99
07/03/02
Scenario1
Scenario2
....

1 Riskmanagement in Context
18
>?@;9AC B c9CD
;
Open interfaces Simulated deals

Reporting characteristics Deals/positions • Fictitious deals
• Analyzer-specific • Structure • Standard hedge
• User-defined • Cash Flows • Planning new deals
• Derived from operative system • Option components
Trader Asset class ...
Market data
Datafeed
Calculation processes
Scenarios
Market Risk Credit Risk Performance
VaR Counterparty Rate
NPV exposure of
Gap return NPV calculator
Storage of results / Reporting structure External price calculators

Portfolio hierarchy
Limit management
N IA @)dX/D
Risk object
Individual transaction (elementary category)

Generic modules
Header Cash flow Option Market

.... segment
1:1 1:n 1:0.1 1:1
Data element Branch level, aggregation rule
1:n
ID
19
4?dX/ D
P5
C
Risk object
• Hierarchically structured entity

• Standard interface between RM and profitability
analysis
• Independent of the RM application
• Risk and performance-based description
• Cash flow-based description
• Can be extended to include other risk factors and
risk
types
• Standardized structure
[
C `@
3;XB(M@Z/ RT`K \

OTC transactions Securities

Money market deals Stocks

Forex deals Bonds (incl. formulas)

Swaps (incl. formulas) Warrants
FRAs Convertible bonds
Structured products

OTC options

V
On interest rates, currencies, Listed derivatives

stocks, indexes Futures
Barrier options On interest rates, securities, indexes
European, American, Options (see OTC)

Bermuda
... Loans (incl. implicit derivatives)
Cash flows
20
H?I JOhJ A |
Backtesting Reporting
VaR/P&L
Duration
Convexity
Stress test
NPV
Generate Administration
archive files of generated
archive files
Delete archived
data from data-
base
Data Base Archive files Archive medium
X e@¡ ¢£@¤4¥ ¦¢ §2¦¨ @© ª¨ «¤¦
Transaction
Transactiondata
data Calculation
Calculation
SAP
SAP using
usingexternal
external
price
pricecalculator
calculator
Market
Marketdata
data
Risk
Analyzer
NPV
NPV
21
¬? ¢@£@®¢¯ °@¢ ¦°4X±²¤¦£
Extension of the data model
External price calculators
Freely-definable risk factors
...
§2¦o´g¤ ¦°@¢ ¨ ¬? °4µ ¤¢
Calculations using summarized transaction data
Selection of relevant risk factors for each deal- no

unnecessary calculations
³
Automatic choice of VaR method
³ Product-specific customizing for VaR method
Portfolio divided up according to method during the valuation run
³
Taking moneyness of options into account
Interval to which full valuation is applied can customized
Selection of calculation level in the risk hierarchy
Parallelization control
22
©¤ · ¦¯¸¹ ºº¹@»¼§½¼:¾?¿c¼A¯¸b¦oÀ Á
¶
¶
No part of this publication may be reproduced or transmitted in any form or for any purpose without the express
permission of SAP AG. The information contained herein may be changed without prior notice.
¶
Some software products marketed by SAP AG and its distributors contain proprietary software components of other
software vendors.
¶
Microsoft®, WINDOWS®, NT®, EXCEL®, Word®, PowerPoint® and SQL Server® are registered trademarks of
Microsoft Corporation.
IBM®, DB2®, DB2 Universal Database, OS/2®, Parallel Sysplex®, MVS/ESA, AIX®, S/390®, AS/400®, OS/390®,
¶
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Informix and Informix® Dynamic ServerTM are trademarks of IBM Corporation in USA and/or other countries.
¶ ORACLE® is a registered trademark of ORACLE Corporation.
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¶
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Massachusetts Institute of Technology.
¶ JAVA® is a registered trademark of Sun Microsystems, Inc.
¶
JAVASCRIPT® is a registered trademark of Sun Microsystems, Inc., used under license for technology invented
and implemented by Netscape.
¶ MarketSet and Enterprise Buyer are jointly owned trademarks of SAP AG and Commerce One.
SAP, SAP Logo, R/2, R/3, mySAP, mySAP.com and other SAP products and services mentioned herein as well as
their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other
countries all over the world. All other product and service names mentioned are trademarks of their respective
companies.
©¤ · ¦¯¸¹ ºº¹@»¼§½¼:¾?¿c¼4¨¸ À ¤ ¦¸ ¢

¶ Weitergabe und Vervielfältigung dieser Publikation oder von Teilen daraus sind, zu welchem Zweck und in welcher
¶
Form auch immer, ohne die ausdrückliche schriftliche Genehmigung durch SAP AG nicht gestattet. In dieser
Publikation enthaltene Informationen können ohne vorherige Ankündigung geändert werden.
¶
Die von SAP AG oder deren Vertriebsfirmen angebotenen Softwareprodukte können Softwarekomponenten auch
anderer Softwarehersteller enthalten.
¶
Microsoft®, WINDOWS®, NT®, EXCEL®, Word®, PowerPoint® und SQL Server® sind eingetragene Marken der
Microsoft Corporation.
IBM®, DB2®, DB2 Universal Database, OS/2®, Parallel Sysplex®, MVS/ESA, AIX®, S/390®, AS/400®, OS/390®,
¶
OS/400®, iSeries, pSeries, xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere®, Netfinity®, Tivoli®, Informix
und Informix® Dynamic ServerTM sind Marken der IBM Corporation in den USA und/oder anderen Ländern.
¶ ORACLE® ist eine eingetragene Marke der ORACLE Corporation.
¶ UNIX®, X/Open®, OSF/1® und Motif® sind eingetragene Marken der Open Group.
¶
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andere hier erwähnte Namen von Citrix-Produkten sind Marken von Citrix Systems, Inc.
¶
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Massachusetts Institute of Technology.
¶ JAVA® ist eine eingetragene Marke der Sun Microsystems, Inc.
¶
JAVASCRIPT® ist eine eingetragene Marke der Sun Microsystems, Inc., verwendet unter der Lizenz der von
Netscape entwickelten und implementierten Technologie.
¶ MarketSet und Enterprise Buyer sind gemeinsame Marken von SAP AG und Commerce One.
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Speaker Title, SAP AG

1 Risk Management in Context

2 Net Present Value and Value at Risk

3 Liquidity and Gap Analysis

SAP AG2002, TRM, Market Risk Analyzer2

1 Risk Management in Context

2 Net Present Value and Value at Risk

3 Liquidity and Gap Analysis

SAP AG2002, TRM, Market Risk Analyzer3

Portfolio Analyzer Market Risk Analyzer Credit Risk Analyzer

Integrated management and control

SAP AG2002, TRM, Market Risk Analyzer4

SAP CFM SAP CFM

SAP CFM SAP R/3

must be evaluated using standard methods

Portfolio Analyzer Market Risk Analyzer Credit Risk Analyzer

Integrated management and control

SAP AG2002, TRM, Market Risk Analyzer5

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Open interfaces for data input Simulated deals

Storage of results / reporting structure External price calculators

SAP AG2002, TRM, Market Risk Analyzer6

1 Risk Management in Context

2 Net Present Value and Value at Risk

3 Liquidity and Gap Analysis

SAP AG2002, TRM, Market Risk Analyzer7

Transaction data Calculation Evaluations

Bal. sheet Non-bal. sheet Sensitivities Portfolio LEVEL 1

Current market prices

SAP AG2002, TRM, Market Risk Analyzer8

YC 1 (+ 1%) Current YC YC 2 (- 1%)

NPV Yield curve 5: 612.1

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Combination of two risk factors or risk

Specification of the range and scale

-10% -5% +/-0% +5% +10%

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SAP AG2002, TRM, Market Risk Analyzer11

Transaction data Calculation Evaluations

Bal. sheet Non-bal.sheet - Full valuation Portfolio LEVEL 1 LEVEL 1

Assets Futures - Delta/gamma method Product

Historical market No. Date NPV Risk Confid. Risk management

4 Feb 90 538.9 -79.2

10 Feb 94 562.6 -55.5 45

11 May 79 564.2 -53.9 40

12 Oct 79 565.5 -52.6

Correlations Price calculator

SAP AG2002, TRM, Market Risk Analyzer12

Interest rates Currencies Volatilities Stocks/indexes

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SAP Stock Stocks

3-month LIBOR GBP

Historical period Historical simulation

Portfolio Valuation of delta and Product-specific

Risk hierarchy Simulated

SAP AG2002, TRM, Market Risk Analyzer15

Parameters Simulated market

SAP AG2002, TRM, Market Risk Analyzer16

Simulated changes Changes to present Distribution of

SAP AG2002, TRM, Market Risk Analyzer17

2.000% Calculation of relative price changes:

0.000% Scenario price

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J_3D Ce

J_3D Ce

J Dchi3A;XB+ D)K K;D 1

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I2; DM CP l K)(

possible per currency)

European, American, Options (see OTC)

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