Morgan Stanley 2015 Annual Report Download - page 111

The average Management VaR for the Primary Risk Categories for 2015 was $47 million compared with $43 million for
2014. The increase was primarily driven by higher market volatility.
Distribution of VaR Statistics and Net Revenues for 2015. One method of evaluating the reasonableness of the Company’s
VaR model as a measure of the Company’s potential volatility of net revenues is to compare VaR with actual trading
revenues. Assuming no intraday trading, for a 95%/one-day VaR, the expected number of times that trading losses should
exceed VaR during the year is 13, and, in general, if trading losses were to exceed VaR more than 21 times in a year, the
adequacy of the VaR model would be questioned. The Company evaluates the reasonableness of its VaR model by
comparing the potential declines in portfolio values generated by the model with actual trading results for the Company, as
well as individual business units. For days where losses exceed the VaR statistic, the Company examines the drivers of
trading losses to evaluate the VaR model’s accuracy relative to realized trading results.
The distribution of VaR Statistics and Net Revenues is presented in the histograms below for the Total Trading populations.
Total Trading. As shown in the 95%/One-Day Management VaR table, the average 95%/one-day Total Management VaR
for 2015 was $50 million. The histogram below presents the distribution of the daily 95%/one-day Total Management VaR
for 2015, which was in a range between $40 million and $60 million for approximately 99% of trading days during the year.
Year Ended December 31, 2015
Daily 95% / One-day Total Management VaR
(dollars in millions)
<40
51
0
79
97
31
20
40 to 45 45 to 50 50 to 55 55 to 60 60 to 65
>65
Number of Days
105