Sec Form 20-F - Registration Statement/annual Report/transition Report/shell Company Report Page 36
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69E.
Model, assumptions, and parameters that should be described include, but are not limited to, how loss is defined
by the model (e.g., loss in earnings, fair values, or cash flows), the type of model used (e.g., variance/covariance,
historical simulation, or Monte Carlo simulation and a description as to how optionality is addressed by the model),
the types of instruments covered by the model (e.g., derivative financial instruments,other financial instruments,
derivative commodity instruments,and whether other instruments are included voluntarily, such ascertain commodity
instruments and positions, cash flows from anticipated transactions, and certain financial instruments excluded
under instruction 3.C.ii. of the General Instructions to Items 11(a) and 11(b)), and other relevant information about
the model’s assumptions and parameters, (e.g., holding periods,confidence intervals, and, when appropriate, the
methods used for aggregating value at risk amounts across market risk exposure categories, such as by assuming
perfect positive correlation,independence, or actual observed correlation).
5.
Under Item 11(a)(2), limitations that should be considered include, but are not limited to:
A.
The exclusion of certain market risk sensitive instruments, positions, and transactions from the disclosures required
under Item 11(a)(1) (e.g., derivative commodity instruments not permitted by contract or business custom to be
settled in cash or with another financial instrument, commodity positions, cash flows from anticipated transactions,
and certain financial instruments excluded under instruction 3.C.ii. of the General Instructions to Items 11(a) and
11(b)). Failure to include such instruments, positions, and transactions in preparing the disclosures under Item
11(a)(1) may be a limitation because the resulting disclosures may not fully reflect the net market risk of a registrant;
and
B.
The ability of disclosures required under Item 11(a)(1)to reflect fully the market risk that may be inherent in
instruments with leverage, option, or prepayment features (e.g., options, including written options, structured notes,
collateralized mortgage obligations, leveraged swaps, and options embedded in swaps).
[end of Instructions to Item 11(a)]
(b)
Qualitative information about market risk.
(1)
To the extent material, describe:
(i)
The registrant’s primary market risk exposures;
(ii)
How those exposures are managed. Such descriptions shall include, but not be limited to, a discussion
of the objectives, general strategies, and instruments, if any, used to manage those exposures; and
(iii)
Changes in either the registrant’s primary market risk exposures or how those exposures are managed,
when compared to what was in effect during the most recently completed fiscal year and what is known
or expected to be in effect in future reporting periods.
(2)
Qualitative information about market risk shall be presented separately for market risk sensitive instruments
entered into for trading purposes and those entered into for purposes other than trading.
Instructions to Item 11(b).
1.
For purposes of disclosure under Item 11(b), primary market risk exposures means:
A.
The following categories of market risk: interest rate risk, foreign currency exchange rate risk, commodity price
risk,and other relevant market rate or price risks (e.g., equity price risk); and
B.
Within each of these categories, the particular markets that present the primary risk of loss to the registrant. For
example, if a registrant has a material exposure to foreign currency exchange rate risk and, within this category
of market risk, is most vulnerable to changes in dollar/yen, dollar/pound,and dollar/peso exchange rates, the
registrant should disclose those exposures. Similarly, if a registrant has a material exposure to interest rate risk
and, within this category of market risk, is most vulnerable to changes in short-term U.S.prime interest rates, it should
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