Goldman Sachs 2012 Annual Report Download - page 93

Management’s Discussion and Analysis
Metrics
We analyze VaR at the firmwide level and a variety of more
detailed levels, including by risk category, business, and
region. The tables below present, by risk category, average
daily VaR and period-end VaR, as well as the high and low
VaR for the period. Diversification effect in the tables
below represents the difference between total VaR and the
sum of the VaRs for the four risk categories. This effect
arises because the four market risk categories are not
perfectly correlated.
Average Daily VaR
in millions
Risk Categories
Year Ended December
2012 2011 2010
Interest rates $78 $94 $93
Equity prices 26 33 68
Currency rates 14 20 32
Commodity prices 22 32 33
Diversification effect (54) (66) (92)
Total $86 $113 $134
Our average daily VaR decreased to $86 million in 2012
from $113 million in 2011, reflecting a decrease in the
interest rates category due to lower levels of volatility,
decreases in the commodity prices and currency rates
categories due to reduced exposures and lower levels of
volatility, and a decrease in the equity prices category due to
reduced exposures. These decreases were partially offset by
a decrease in the diversification benefit across
risk categories.
Our average daily VaR decreased to $113 million in 2011
from $134 million in 2010, primarily reflecting decreases in
the equity prices and currency rates categories, principally
due to reduced exposures. These decreases were partially
offset by a decrease in the diversification benefit across
risk categories.
Year-End VaR and High and Low VaR
in millions
Risk Categories
As of December
Year Ended
December 2012
2012 2011 High Low
Interest rates $64 $100 $103 $61
Equity prices 22 31 92 14
Currency rates 914 22 9
Commodity prices 18 23 32 15
Diversification effect (42) (69)
Total $71 $99 $122 $67
Our daily VaR decreased to $71 million as of
December 2012 from $99 million as of December 2011,
primarily reflecting decreases in the interest rates and equity
prices categories due to lower levels of volatility. These
decreases were partially offset by a decrease in the
diversification benefit across risk categories.
During the year ended December 2012, the firmwide VaR
risk limit was not exceeded and was reduced on one
occasion due to lower levels of volatility.
During the year ended December 2011, the firmwide VaR
risk limit was exceeded on one occasion. It was resolved by
a temporary increase in the firmwide VaR risk limit, which
was subsequently made permanent due to higher levels of
volatility. The firmwide VaR risk limit had previously been
reduced on one occasion in 2011, reflecting lower risk
utilization and the market environment.
Goldman Sachs 2012 Annual Report 91