Goldman Sachs 2013 Annual Report Download - page 70

Management’s Discussion and Analysis
VaR is the potential loss in value of inventory positions, as
well as certain other financial assets and financial liabilities,
due to adverse market movements over a defined time
horizon with a specified confidence level. For both risk
management purposes and regulatory capital calculations
we use a single VaR model which captures risks including
interest rates, equity prices, currency rates and commodity
prices. VaR used for regulatory capital requirements
(regulatory VaR) differs from risk management VaR due to
different time horizons and confidence levels (10-day and
99% for regulatory VaR vs. one-day and 95% for risk
management VaR), as well as differences in the scope of
positions on which VaR is calculated. Stressed VaR is the
potential loss in value of inventory positions during a
period of significant market stress. Incremental risk is the
potential loss in value of non-securitized inventory
positions due to the default or credit migration of issuers of
financial instruments over a one-year time horizon.
Comprehensive risk is the potential loss in value, due to
price risk and defaults, within the firm’s credit correlation
positions. The standardized measurement method is used to
determine RWAs for specific risk for certain positions by
applying supervisory defined risk-weighting factors to such
positions after applicable netting is performed.
We provide additional information on regulatory VaR,
stressed VaR, incremental risk, comprehensive risk and the
standardized measurement method for specific risk on our
web site as described under “Business — Available
Information” in Part I, Item 1 of the 2013 Form 10-K.
The table below presents information on the components of
RWAs within our consolidated regulatory capital ratios,
which were based on Basel I, as implemented by the Federal
Reserve Board, and also reflected the revised market risk
regulatory capital requirements.
in millions
As of
December
2013
Credit RWAs
OTC derivatives $ 94,753
Commitments and guarantees 147,397
Securities financing transactions 230,010
Other 396,087
Total Credit RWAs 268,247
Market RWAs
Regulatory VaR 13,425
Stressed VaR 38,250
Incremental risk 9,463
Comprehensive risk 18,150
Specific risk 85,691
Total Market RWAs 164,979
Total RWAs 4$433,226
1. Principally includes certain commitments to extend credit and letters
of credit.
2. Represents resale and repurchase agreements and securities borrowed and
loaned transactions.
3. Principally includes receivables from customers, certain loans, other assets,
and cash and cash equivalents.
4. Under the current regulatory capital framework, there is no explicit
requirement for Operational risk.
68 Goldman Sachs 2013 Annual Report