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The Effects Of Exposure Levels On The Group 's Exposure

Decent Essays

Scenario Analysis is the same as stress testing which capture the Group’s exposure to unlikely but plausible events. Many different scenarios are run, in order to account for significant movements in credit spreads, interest rates, commodity prices, and exchange rates.

Citi performs stress testing on a regular basis to estimate the impact of extreme market movements. It is performed on individual positions and trading portfolios, as well as in aggregate inclusive of multiple trading portfolios. Citi’s independent market risk management organization, after consultations with the businesses, develops both systemic and specific stress scenarios, reviews the output of periodic stress testing exercises, and uses the information to assess the ongoing appropriateness of exposure levels and limits.
FACTOR SENSITIVITY

Factor sensitivities are defined as the change in market factors affecting a current position, like the Treasury, by a single basis point. Citi practices calculating, monitoring and limiting all factor sensitivities across their entire material risk portfolio. Essentially, the factor sensitivities take the single basis point exposure and ensure that these levels are monitored across the firm. This appears to be a manual process of which requires a large amount of time to keep up with. I also question the usefulness of such a calculation.

In addition, the firm claims that these measurements are used to assess the amount of interest rate swaps that must be

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