Bank of Montreal 2000 Annual Report Download - page 49

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Aggregate Market Value Exposure
Interest Rate Risk Sensitivity
–
Rising Interest Rates 2000 1999
Structural and Structural and
money market portfolios money market portfolios
As at October 31, 2000 100 basis point Rising interest 100 basis point Rising interest
(after-tax Canadian equivalent $ millions) increase rate risk(b) increase rate risk (b)
Earnings at risk over the next 12 months (a) 40.1 17.3 70.2 43.6
Economic value at risk (a) 215.8 270.6 351.0 438.7
(a) Risk measures include the impact of embedded options but exclude actions that we would take to reduce risk or the actions that clients might
take in response to changing rates. Other assumptions are consistent with those disclosed in the interest rate gap position table on page 74 of
the Supplemental Information.
(b) Risk measures are based upon statistical analysis of historical data on an individual portfolio basis using a 99% confidence level (1999
–
97.5%
confidence level).
Total Trading and Underwriting VaR Summary
for the Period from November 1, 1999 to October 31, 2000
(pre-tax Canadian equivalent $ millions)* As at year-end Average High Low
Interest Rate 14.1 17.9 24.4 11.6
Foreign Exchange 5.8 3.7 8.1 1.7
Commodity 1.5 2.6 6.6 0.7
Equity 6.9 5.3 9.7 2.8
Correlation Effect (4.3) (4.3) (6.9) (2.8)
Total 24.0
*One-day measure using 99% confidence level.
Includes interest rate and foreign exchange VaR for the year, commodity VaR from February 1, 2000 and equity VaR from May 1, 2000. Reflects
correlated effects for interest rate and foreign exchange from August 1, 2000.
Market Risk Sensitivity
–
Adverse Changes in Market Rates/Prices (a) 2000 1999
As at October 31 (after-tax equivalent $ millions) Cdn$ US$ Cdn$ US$
Earnings at risk over the next 12 months (b) 51.2 53.8 54.4 45.1
Market value exposure (b) 209.5 72.5 371.1 98.1
(a) Earnings at risk and economic value at risk include Cdn$6.6 and US$4.4 in 2000 and Cdn$17.5 and US$12.8 in 1999 related to trading portfolios.
(b) Assumptions for the model are consistent with (a) and (b) under interest rate risk sensitivity, with the additional inclusion of minimum rates
on deposits.
Initiatives in 2000 were undertaken to reduce our market value exposure. Our earnings at risk
exposure was relatively stable during 2000.
Further details regarding derivative exposures are provided in note 21 to the consolidated
financial statements.
Bank of Montreal Group of Companies Annual Report 2000 ■25