Prudential 2006 Annual Report Download - page 90
Download and view the complete annual report
Please find page 90 of the 2006 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.-
1 -
2
-
3
-
4
-
5
-
6
-
7
-
8
-
9
-
10
-
11
-
12
-
13
-
14
-
15
-
16
-
17
-
18
-
19
-
20
-
21
-
22
-
23
-
24
-
25
-
26
-
27
-
28
-
29
-
30
-
31
-
32
-
33
-
34
-
35
-
36
-
37
-
38
-
39
-
40
-
41
-
42
-
43
-
44
-
45
-
46
-
47
-
48
-
49
-
50
-
51
-
52
-
53
-
54
-
55
-
56
-
57
-
58
-
59
-
60
-
61
-
62
-
63
-
64
-
65
-
66
-
67
-
68
-
69
-
70
-
71
-
72
-
73
-
74
-
75
-
76
-
77
-
78
-
79
-
80 -
81 -
82 -
83 -
84 -
85 -
86 -
87 -
88 -
89 -
90 -
91 -
92 -
93 -
94 -
95 -
96 -
97 -
98 -
99 -
100 -
101
-
102
-
103
-
104
-
105
-
106
-
107
-
108
-
109
-
110
-
111
-
112
-
113
-
114
-
115
-
116
-
117
-
118
-
119
-
120
-
121
-
122
-
123
-
124
-
125
-
126
-
127
-
128
-
129
-
130
-
131
-
132
-
133
-
134
-
135
-
136
-
137
-
138
-
139
-
140
-
141
-
142
-
143
-
144
-
145
-
146
-
147
-
148
-
149
-
150
-
151
-
152
-
153
-
154
-
155
-
156
-
157
-
158
-
159
-
160
-
161
-
162
-
163
-
164
-
165
-
166
-
167
-
168
-
169
-
170
-
171
-
172
-
173
-
174
-
175
-
176
-
177
-
178
-
179
-
180
-
181
-
182
-
183
-
184
-
185
-
186
-
187
-
188
-
189
-
190
-
191
-
192
 |
 |
factors and the correlations of those factors. The total VaR for our trading activities, which considers our combined exposure to interest rate
risk, equity price risk, foreign currency exchange rate risk, and commodities price risk, expressed in terms of adverse changes to fair value
at a 95% confidence level over a one-day time horizon, was $1 million as of December 31, 2006 and $1 million as of December 31, 2005.
The largest component of this total VaR as of December 31, 2006 and 2005 was related to commodities price risk. The total average daily
VaR for our trading activities considering our exposure to interest rate risk, equity risk, foreign currency exchange rate risk, and
commodities price risk, expressed in terms of adverse changes to fair value with a 95% confidence level over a one-day time horizon, was
$1 million during 2006 and $1 million during 2005. The largest component of both periods’ total average daily VaR was related to
commodities price risk.
Limitations of VaR Models
Although VaR models are 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, VaR models should not be viewed 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. The results of these models and analysis thereof are subject to the judgment of our risk
management personnel.
PRUDENTIAL FINANCIAL, INC. 2006 ANNUAL REPORT
88