Prudential 2001 Annual Report Download - page 99

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Prudential Financial, Inc.
Limitations of VaR Models
Although VaR models represent a recognized tool for risk management, they have inherent limitations, including
reliance on historical data that may not be indicative of future market conditions or trading patterns. Accordingly,
you should not view VaR models as a predictor of future results. We may incur losses that could be materially in
excess of the amounts indicated by the models on a particular trading day or over a period of time, and there have
been instances when results have fallen outside the values generated by our VaR models. A VaR model does not
estimate the greatest possible loss. We use these models together with other risk management tools, including stress
testing. The results of these models and analysis thereof are subject to the judgment of our risk management
personnel.
Prudential Financial 2001 Annual Report 97