Goldman Sachs 2013 Annual Report Download - page 97

Management’s Discussion and Analysis
Sensitivity Measures
Certain portfolios and individual positions are not included
in VaR because VaR is not the most appropriate risk
measure. Other sensitivity measures we use to analyze
market risk are described below.
10% Sensitivity Measures. The table below presents
market risk for inventory positions that are not included in
VaR. The market risk of these positions is determined by
estimating the potential reduction in net revenues of a 10%
decline in the underlying asset value. Equity positions
below relate to private and restricted public equity
securities, including interests in funds that invest in
corporate equities and real estate and interests in hedge
funds, which are included in “Financial instruments owned,
at fair value.” Debt positions include interests in funds that
invest in corporate mezzanine and senior debt instruments,
loans backed by commercial and residential real estate,
corporate bank loans and other corporate debt, including
acquired portfolios of distressed loans. These debt positions
are included in “Financial instruments owned, at fair
value.” See Note 6 to the consolidated financial statements
for further information about cash instruments. These
measures do not reflect diversification benefits across asset
categories or across other market risk measures.
Asset Categories 10% Sensitivity
Amount as of December
in millions 2013 2012
Equity 1$2,256 $2,471
Debt 1,522 1,676
Total $3,778 $4,147
1. December 2012 includes $208 million related to our investment in the
ordinary shares of ICBC, which was sold in the first half of 2013.
Credit Spread Sensitivity on Derivatives and
Borrowings. VaR excludes the impact of changes in
counterparty and our own credit spreads on derivatives as
well as changes in our own credit spreads on unsecured
borrowings for which the fair value option was elected. The
estimated sensitivity to a one basis point increase in credit
spreads (counterparty and our own) on derivatives was a
gain of $4 million and $3 million (including hedges) as of
December 2013 and December 2012, respectively. In
addition, the estimated sensitivity to a one basis point
increase in our own credit spreads on unsecured
borrowings for which the fair value option was elected was
a gain of $8 million and $7 million (including hedges) as of
December 2013 and December 2012, respectively.
However, the actual net impact of a change in our own
credit spreads is also affected by the liquidity, duration and
convexity (as the sensitivity is not linear to changes in
yields) of those unsecured borrowings for which the fair
value option was elected, as well as the relative
performance of any hedges undertaken.
Interest Rate Sensitivity. As of December 2013 and
December 2012, the firm had $14.90 billion and
$6.50 billion, respectively, of loans held for investment
which were accounted for at amortized cost and included in
“Receivables from customers and counterparties,”
substantially all of which had floating interest rates. As of
December 2013 and December 2012, the estimated
sensitivity to a 100 basis point increase in interest rates on
such loans was $136 million and $62 million, respectively,
of additional interest income over a 12-month period,
which does not take into account the potential impact of an
increase in costs to fund such loans. See Note 8 to the
consolidated financial statements for further information
about loans held for investment.
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