Lifting The Lid On Traded Market Risk Oct 06

Standard & Poors, October 2006

Abstract
Standard & Poor's Ratings Services considers that no single measure can capture the complexity of market risk, or indeed any other risk. We employ a range of tools to enhance our understanding of market risk. This includes our approach to Enterprise Risk Management, where we assess an institution's Policies, Infrastructure, and Methodologies (the PIM approach). We also consider stress testing and scenario analysis to be key risk-management instruments. Nevertheless, publicly disclosed market risk measures can be helpful. Seen in their proper context, value-at-risk (VaR) numbers can enable a better understanding of market risk characteristics, particularly when the full extent of available data--highs, lows, and back-testing exceptions--are considered. Standard & Poor's also analyzes distributions of actual trading revenue, and differences in...

Companies mentioned in this report are:
- Deutsche Bank AG
- Merrill Lynch & Co. Inc.
- Bear Stearns Cos. LLC
- Lehman Brothers Holdings Inc.
- Morgan Stanley
- JPMorgan Chase & Co.
- Citigroup Inc.
- Credit Suisse Group AG
- The Goldman Sachs Group Inc.
- UBS AG

Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.

Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.

- Deutsche Bank AG
- Merrill Lynch & Co. Inc.
- Bear Stearns Cos. LLC
- Lehman Brothers Holdings Inc.
- Morgan Stanley
- JPMorgan Chase & Co.
- Citigroup Inc.
- Credit Suisse Group AG
- The Goldman Sachs Group Inc.
- UBS AG

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