Citibank 2015 Annual Report Download - page 123

105
MARKET RISK OF TRADING PORTFOLIOS
Trading portfolios include positions resulting from market making activities,
hedges of certain available-for-sale (AFS) debt securities, the CVA relating
from derivatives counterparties and all associated hedges, fair value option
loans, hedges to the loan portfolio and the leverage finance pipeline within
capital markets origination within ICG.
The market risk of Citi’s trading portfolios is monitored using a
combination of quantitative and qualitative measures, including but not
limited to:
• factor sensitivities;
• value at risk (VAR); and
• stress testing.
Each trading portfolio across Citi’s businesses has its own market risk
limit framework encompassing these measures and other controls, including
trading mandates, permitted product lists and a new product approval
process for complex products.
The following chart of total daily trading-related revenue (loss) captures
trading volatility and shows the number of days in which revenues for Citi’s
trading businesses fell within particular ranges. Trading-related revenues
includes trading, net interest and other revenue associated with Citi’s trading
businesses. It excludes DVA, FVA and CVA adjustments incurred due to changes
in the credit quality of counterparties as well as any associated hedges to that
CVA. In addition, it excludes fees and other revenue associated with capital
markets origination activities. Trading-related revenues are driven by both
customer flows and the changes in valuation of the trading inventory. As
shown in the chart, positive trading-related revenue was achieved for 97% of
the trading days in 2015.
0
10
20
30
40
(100) to (90)
(160) to (150)
(2)
(140) to (130) (150) to (140) (130) to (120) (110) to (100) (120) to (110)
(10) to 0
(20) to (10) (30) to (20) (40) to (30) (90) to (80)
10 to 20 20 to 30 30 to 40 50 to 60 60 to 70 70 to 80 80 to 90
90 to 100
100 to 110 110 to 120 130 to 140 140 to 150 150 to 160 160 to 170 170 to 180
Number of Days
(50) to (40)
0 to 10
40 to 50
120 to 130
(80) to (70) (70) to (60) (60) to (50)
D
aily Trading-Related Revenue (Loss)(1)—Twelve Months Ended December 31, 2015
In millions of dollars
(1) Reflects the effects of asymmetrical accounting for economic hedges of certain AFS debt securities. Specifically, the change in the fair value of hedging derivatives is included in Trading-related revenue, while the
offsetting change in the fair value of hedged AFS debt securities is included in AOCI and not reflected above.
(2) Occurred on January 15, 2015, principally related to the impact of the Swiss National Bank’s announcement removing the minimum exchange rate of Swiss franc per Euro.