5. MARKET RISK (CONTINUED) 5.3 Management of Market Risk (continued) b) Market Risk in the trading book portfolio Market risk in the trading book portfolio is monitored and managed using Value-at-Risk (“VaR”). It is a technique that estimates the potential losses that could occur as a result of market rates movements over a specified time horizon and to a given level of confidence. The VaR model used by the Bank is based on historical simulation which derives plausible future scenarios from the past series of recorded market rates and prices. The historical simulation model used by the Bank incorporates the following features: • • Potential market movements are calculated with reference to data from the past two years; • • Historical market rates are calculated with reference to foreign exchange rates and profit rates; and • • VaR is calculated using a 99 per cent confidence level and for a one-day holding period. A summary of the VaR position of the Bank’s trading book portfolios as at the reporting date is as follows: As at 31.12.2021 1.1.2021 to 31.12.2021 Average Maximum Minimum Bank RM million RM million RM million RM million Profit Rate Risk 0.14 1.05 2.39 0.14 Foreign Exchange Risk 0.36 0.66 1.19 0.34 Overall 0.50 1.71 2.78 0.50 As at 31.12.2020 1.1.2020 to 31.12.2020 Average Maximum Minimum Bank RM million RM million RM million RM million Profit Rate Risk 2.76 1.88 3.32 0.01 Foreign Exchange Risk 0.42 0.47 1.02 0.23 Overall 3.18 2.36 3.89 0.36 INTEGRATED ANNUAL REPORT 202 1 423 Key Messages Overview Value Creation MD&A Sustainability Leadership Accountability Financial Additional Information
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