EMC 2002 Annual Report Download - page 39

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Table of Contents
income (loss). These instruments are not leveraged, and are not held for trading purposes. A portion of our investment portfolio is comprised of mortgage-
backed securities that are subject to prepayment risk.
We employ a variance/covariance model to calculate value-at-risk for our combined investment portfolios. This model assumes that the relationships
among market rates and prices that have been observed over the last year are valid for estimating risk over the next trading day. Estimates of volatility and
correlations of market factors are drawn from the RiskMetrics dataset as of December 31, 2002. This model measures the potential loss in fair value that could
arise from changes in market conditions, using a 95% confidence level and assuming a one-day holding period. The value at risk on the investment portfolios
was $5.5 million as of December 31, 2002 and $9.3 million as of December 31, 2001. The average, high and low value-at-risk amounts for 2002 and 2001
were as follows (in millions):
Average High Low
2002 $ 7.3 $ 8.2 $ 5.5
2001 10.6 12.8 9.3
The average value represents an average of the quarter-end values. The high and low valuations represent the highest and lowest values of the quarterly
amounts.
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of temporary cash investments, short and long-term
investments and trade and notes receivable. We place our temporary cash investments and short and long-term investments in investment grade instruments
and limit the amount of investment in any one issuer. The credit risk associated with accounts and notes receivables is minimal due to the large number of
customers and their broad dispersion over many different industries and geographic areas. We customarily sell the notes receivable we derive from our leasing
activity. Generally, we do not retain any recourse on the sale of these notes.
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