Morgan Stanley 2014 Annual Report Download - page 138

The histogram below shows the distribution for 2014 of daily net trading revenues, including profits and losses
from Primary Risk Categories, Credit Portfolio positions and intraday trading activities, for the Company’s
Trading businesses. Daily net trading revenues also include intraday trading activities but exclude certain items
not captured in the VaR model, such as fees, commissions and net interest income. Daily net trading revenues
differ from the definition of revenues required for Regulatory VaR backtesting, which further excludes intraday
trading. During 2014, the Company experienced net trading losses on 32 days, of which no day was in excess of
the 95%/one-day Total Management VaR.
07
25
75
92
41
15
310
<-50
-25 to 0
-50 to -25
0 to 25
25 to 50 50 to 75
75 to 100
100 to 125
125 to 150
>150
Number of Days
Year Ended December 31, 2014
Daily Net Trading Revenues
(dollars in millions)
(Loss) Gain
Non-trading Risks.
The Company believes that sensitivity analysis is an appropriate representation of the Company’s non-trading
risks. Reflected below is this analysis covering substantially all of the non-trading risk in the Company’s
portfolio.
Counterparty Exposure Related to the Company’s Own Credit Spread.
The credit spread risk relating to the Company’s own mark-to-market derivative counterparty exposure is
managed separately from VaR. The credit spread risk sensitivity of this exposure corresponds to an increase in
value of approximately $6 million and $5 million for each 1 basis point widening in the Company’s credit spread
level for December 31, 2014 and December 31, 2013, respectively.
Funding Liabilities.
The credit spread risk sensitivity of the Company’s mark-to-market funding liabilities corresponded to an
increase in value of approximately $10 million and $11 million for each 1 basis point widening in the Company’s
credit spread level for December 31, 2014 and December 31, 2013, respectively.
Interest Rate Risk Sensitivity on Income from Continuing Operations.
The Company measures the interest rate risk of certain assets and liabilities by calculating the hypothetical
sensitivity of net interest income to potential changes in the level of interest rates over the next 12 months. This
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