Letno poročilo 2007 - UniCredit Banka Slovenija dd

and structured transactions for corporate customers and closes therisk positions opened, which exceed available market risk limits withspecialized trading desks within UniCredit Group. UniCredit BankaSlovenija d.d. also uses derivatives to optimize its balance sheetstructure.Those derivatives, which are designated as cash flow hedges are keptin separate portfolios. The efficiency test is performed on a monthlybasis, both in 2007 and 2006 there were no inefficiencies detected.For portfolio management and risk management purposes, contractsare valued at current prices using recognized and tested models.Market values show the contract values as of the balance sheet date,while positive market values of OTC contracts indicate the potentialdefault risk arising from the relevant activity.For the purposes of credit risk management, UniCredit BankaSlovenija d.d. has used a new counterparty model since 2006. Inthe old system, OTC derivatives (forward transactions, swaps, andoptions bought) were taken into account with their respective positivemarket value and an add-on depending on the product, currency andmaturity similar to the regulatory requirements. The new model isbased on the simulation approach. The exposure of any individualcounterparty is evaluated by running a path simulation of its portfoliobased on the individual products contained therein.The future present value of the whole portfolio is calculated basedon scenarios representing volatilities and correlations of a three-yeartime series of the risk factors.The limit utilization is the maximum of the 97.5 % quantiles of eachgrid point.UniCredit Bank · 2007 Annual Report 193