Barclays 2005 Annual Report Download - page 222

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54 Financial risk management (continued)
Trading Market Risk
Group policy is to concentrate trading activities in Barclays Capital. This includes transactions where Barclays Capital acts as principal with clients or
with the market. For maximum efficiency, client and market activities are managed together. In Barclays Capital, trading risk occurs in both the
trading book and the banking book as defined for regulatory purposes (not IFRS).
In anticipation of future customer demand, Barclays maintains access to market liquidity by quoting bid and offer prices with other market makers
and carries an inventory of capital market and treasury instruments, including a broad range of cash, securities and derivatives. Trading positions
and any offsetting hedges are established as appropriate to accommodate customer or Barclays requirements.
Derivatives entered into for trading purposes include swaps, forward rate agreements, futures, credit derivatives, options and combinations of
these instruments.
Analysis of trading market risk exposures
The table below shows the DVaR statistics for Barclays Capital’s trading activities (trading book and banking book).
Barclays Capital DVaR: Summary table for 2005 and 2004
12 months to 12 months to
31st December 2005 31st December 2004
Average High(a) Low(a) Average High(a) Low(a)
£m £m £m £m £m £m
Interest rate risk 25.3 44.8 15.4 25.0 53.6 15.1
Credit spread risk 23.0 28.3 19.0 22.6 32.9 16.0
Foreign exchange risk 2.8 5.3 1.4 2.4 7.4 0.9
Equities risk 5.9 8.2 3.9 4.2 7.9 2.2
Commodities risk 6.8 11.4 4.5 6.0 14.4 2.2
Diversification effect (31.9) – – (25.9) – –
Total DVaR(b) 31.9 40.4 25.4 34.3 46.8 24.0
Notes to the accounts
For the year ended 31st December 2005
Notes
(a) The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole.
Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table.
(b) The year-end total DVaR for 2005 was £37.4m (2004: £31.9m).
Barclays PLC
Annual Report 2005
220