UBI Banca Group

Backtesting analysis
Backtesting analysis is designed to test the predictive power of the VaR model adopted. It uses an
actual profit and loss calculated on the basis of returns on positions in the portfolio on the previous
day.
The backtesting analysis for the trading book of the UBI Group is given below for 2011.
UBI Group trading book: backtesting for 2011
12000000
9000000
Profit & Loss
VaR
6000000
3000000
0
‐3000000
‐6000000
‐9000000
‐12000000
‐15000000
Actual backtesting analysis of the supervisory portfolios of the UBI Group identified twelve
overshoots, i.e. twelve days when the P&L was worse than the VaR calculated by the risk
management system. These overshoots occurred in the second half of the year when the Italian
sovereign debt crisis worsened.
Theoretical stress tests
The Group has a stress testing programme designed to analyse the reaction of portfolios to risk factor
shocks with the objective of verifying the ability of the supervisory capital to absorb very large
potential losses and to identify possible measures needed to reduce risks and conserve the capital
itself.
Stress tests based on theoretical shocks consist of specially created extreme shifts in interest rate
(short, medium and long term), credit spread, exchange rate, equity price and volatility curves. A brief
description of the most significant stress tests is given below.
• Bull/Bear Steepening: a shock on the yield curve where the decrease/increase in short term
interest rates is greater/smaller than that for long term rates.
418