My first Publication ocbc_ar17_fullreport_english | Page 93

Frequency distribution of Group
Group Trading
Trading Book
Book Daily
Daily Total
Total VaR
VaR
(One Day Holding Period) for 2017
Number of Trading Days
120
100
80
60
40
0
20
RISK MONITORING AND CONTROL
Limits
Only authorised trading activities for
approved products may be undertaken by
the various trading units. All trading risk
positions are monitored on a daily basis
against approved and allocated limits
by independent support units. Trading
activities are conducted within approved
mandates and dynamically hedged to
remain within limits. Hedge effectiveness
is implicit in ensuring compliance with
market risk limits and enforced through
independent limits monitoring. Limits
are approved to reflect available and
anticipated trading opportunities, with
clearly defined exception escalation
procedures. Exceptions, including any
temporary breaches, are promptly
reported and escalated to senior
management for resolution. Multiple
risk limits (VaR and risk sensitivities),
P&L stop loss and other measures
are also used to manage market risk
exposures holistically.
(S$ million)
120 Frequency distribution of Group Trading Daily P&L for FY 2017
Number of Trading Days
100
80
60
40
0
20
Back-testing
To ensure the continued integrity of the
VaR model, we regularly back-test the VaR
estimates against actual daily trading
P&Ls and theoretical P&Ls to confirm that
the VaR model does not underestimate
market risk exposures.
Frequency distribution of Group Trading Daily P&L for FY 2017
Model Validation
Model validation is also an integral part
of our risk control process. Financial
models are used to price financial
instruments and to calculate VaR. We
ensure that the models used are fit for
their intended purposes through internal
validation and assessment. Market rates
used for risk measurement and valuation
are sourced independently, thereby
enhancing the integrity of the trading
P&L and risk measures generated by
the financial models used in managing
market risk exposures.
(S$ million)
100
BUILDING ON OUR CORPORATE STRATEGY FOR SUSTAINABLE GROWTH
91