eTrade 2006 Annual Report Download - page 73

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interest rates change, we will re-adjust our strategy and mix of assets, liabilities and derivatives to optimize our
position. For example, a 100 basis points increase in rates may not result in a change in value as indicated above.
The ALCO monitors E*TRADE Bank’s interest rate risk position.
Other Market Risk
Equity Security Risk
Equity securities risk is the risk of potential loss from investing in public and private equity securities
including foreign currency exchange risk. We hold equity securities for investment purposes and in trading
securities for market-making purposes. The foreign currency exchange risk associated with these investments is
not material to the Company. For investment purposes, we currently hold publicly traded equity securities, in
which we had gross unrealized gains of $18.6 million as of December 31, 2006. As each security’s market price
fluctuates, we are exposed to risk of a loss with respect to these unrealized gains. See publicly traded equity
securities discussion at Note 6—Available-for-Sale Mortgage-Backed and Investment Securities in
Item 8. Financial Statements and Supplementary Data.
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