Goldman Sachs 2013 Annual Report Download - page 95

Management’s Discussion and Analysis
Systems
We have made a significant investment in technology to
monitor market risk including:
‰an independent calculation of VaR and stress measures;
‰risk measures calculated at individual position levels;
‰attribution of risk measures to individual risk factors of
each position;
‰the ability to report many different views of the risk
measures (e.g., by desk, business, product type or legal
entity); and
‰the ability to produce ad hoc analyses in a timely manner.
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
2013 2012 2011
Interest rates $ 63 $ 78 $ 94
Equity prices 32 26 33
Currency rates 17 14 20
Commodity prices 19 22 32
Diversification effect (51) (54) (66)
Total $ 80 $ 86 $113
Our average daily VaR decreased to $80 million in 2013
from $86 million in 2012, primarily reflecting a decrease in
the interest rates category principally due to lower levels of
volatility and decreased exposures. This decrease was
partially offset by an increase in the equity prices category
principally due to increased exposures.
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.
Year-End VaR and High and Low VaR
in millions
Risk Categories
As of December Year Ended
December 2013
2013 2012 High Low
Interest rates $ 59 $ 64 $ 77 $54
Equity prices 35 22 90 120
Currency rates 16 937 9
Commodity prices 20 18 25 13
Diversification effect (45) (42)
Total $ 85 $ 71 $127 $64
1. Reflects the impact of temporarily increased exposures as a result of equity
underwriting transactions.
Our daily VaR increased to $85 million as of
December 2013 from $71 million as of December 2012,
primarily reflecting increases in the equity prices and
currency rates categories, principally due to increased
exposures. These increases were partially offset by a
decrease in the interest rates category primarily due to
decreased exposures.
During 2013 and 2012, the firmwide VaR risk limit was
not exceeded and in each year it was reduced on one
occasion due to lower levels of volatility.
Goldman Sachs 2013 Annual Report 93