Barclays 2010 Annual Report Download - page 264

Notes to the financial statements
For the year ended 31st December 2010 continued
41 Fair value of financial instruments continued
Commercial real estate loans
Unobservable inputs include, but are not limited to, market quoted origination spreads, internal credit ratings and loan subordination. The sensitivity
is determined by applying a +/- 3% shift for each underlying position based on the largest upward and downward price movement of observable
published indices of a similar nature in the preceding 12-month period.
Asset backed products
For non-agency RMBS, non-investment grade MBS, mortgage related asset backed credit derivatives and other ABS, the price movements on appropriate
indices are used. Sensitivity is based on the average of the largest upward and downward price movement in the preceding 12-month period.
Other credit products
The sensitivity of valuations of the illiquid CDS portfolio is determined by applying a +/- 0.2% stress to the DV01 for each underlying reference asset.
The stress is based upon the average bid offer spreads observed in the market for similar CDS.
Derivative exposure to Monoline insurers
The main unobservable input for these exposures is the credit quality of the relevant Monoline insurers. The approach to determine sensitivity is
dependent on the credit quality of the Monoline insurer. Sensitivity is computed by shifting the internal credit rating of the Monoline insurer based
on scenario analysis determined by evaluating estimated counterparty ratings in the event of a decline in the market environment.
Non-asset backed debt instruments
The sensitivity for convertible bonds, is determined by applying a +/- 1% shift to each underlying position. This shift is based upon the bid offer spreads
observed in the market for similar bonds.
The sensitivity for corporate bonds portfolio is determined by applying a +/- 1% shift to each underlying position. This shift is based upon a multiplier
to the average bid offer spreads observed in the market for similar bonds.
The sensitivity for fixed and floating rate notes is calculated using a +/- 1% shift in credit spreads.
Equity products
The sensitivity is estimated based on the dispersion of consensus data services either directly or through proxies.
Private equity
The relevant valuation models are sensitive to each of a number of key assumptions, such as projected future earnings, comparator multiples,
marketability discounts and discount rates. Valuation sensitivity is estimated by flexing such assumptions to reasonable alternative levels and
determining the impact on the resulting valuation.
Funds and fund-linked products
The sensitivity is calculated on an individual fund basis using a loss based scenario approach which factors in the underlying assets of the specific fund
and assumed recovery rates.
Foreign exchange products
The sensitivity is based on the statistical spread of consensus data services, calculated using 2 standard deviations of the mid correlation dispersion.
262 Barclays PLC Annual Report 2010 www.barclays.com/annualreport10