JP Morgan Chase 2012 Annual Report Download - page 157

JPMorgan Chase & Co./2012 Annual Report 167
The chart shows that for year ended December 31, 2012,
the Firm posted market risk related gains on 220 of the
261 days in this period, with gains on eight days exceeding
$200 million. The chart includes year to date losses
incurred in the synthetic credit portfolio. CIB and Credit
Portfolio posted market risk-related gains on 254 days in
the period.
The inset graph looks at those days on which the Firm
experienced losses and depicts the amount by which VaR
exceeded the actual loss on each of those days. Of the
losses that were sustained on the 41 days of the 261 days
in the trading period, the Firm sustained losses that
exceeded the VaR measure on three of those days. These
losses in excess of the VaR all occurred in the second
quarter of 2012 and were due to the adverse effect of
market movements on risk positions in the synthetic credit
portfolio held by CIO. During the year ended December 31,
2012, CIB and Credit Portfolio experienced seven loss days;
none of the losses on those days exceeded their respective
VaR measures.
Other risk measures
Debit valuation adjustment sensitivity
The following table provides information about the gross
sensitivity of DVA to a one-basis-point increase in JPMorgan
Chase’s credit spreads. This sensitivity represents the
impact from a one-basis-point parallel shift in JPMorgan
Chase’s entire credit curve. However, the sensitivity at a
single point in time multiplied by the change in credit
spread at a single maturity point may not be representative
of the actual DVA gain or loss realized within a period. The
actual results reflect the movement in credit spreads across
various maturities, which typically do not move in a parallel
fashion, and is the product of a constantly changing
exposure profile, among other factors.
Debit valuation adjustment sensitivity
(in millions)
One basis-point increase in
JPMorgan Chase’s credit spread
December 31, 2012 $ 34
December 31, 2011 35
Economic-value stress testing
Along with VaR, stress testing is important in measuring and
controlling risk. While VaR reflects the risk of loss due to
adverse changes in markets using recent historical market
behavior as an indicator of losses, stress testing captures
the Firm’s exposure to unlikely but plausible events in
abnormal markets. The Firm runs weekly stress tests on
market-related risks across the lines of business using
multiple scenarios that assume significant changes in risk
factors such as credit spreads, equity prices, interest rates,
currency rates or commodity prices. The framework uses a
grid-based approach, which calculates multiple magnitudes
of stress for both market rallies and market sell-offs for