The most important Risk management tool used by Brascan Gestão de Ativos is the Parametric Value-at-Risk, where risk is calculated by a system developed by Banco Brascan S/A using the RiskMetrics™ method, duly adapted to the characteristics of the Brazilian market. The system takes into consideration the daily volatility and correlation of up to 250 primary risk factors.

In the case of options, Banco Brascan S/A uses Monte Carlo simulations, where 4,000 scenarios are considered each day. Banco Brascan S/A also conduct a Stress Test on a daily basis, where a hypothetical loss is calculated as a result of the worst case scenario among over 20,000 possibilities.

In addition to the above techniques, Banco Brascan’s Management System also calculates the ideal hedge for each type of primary risk and the influence of liquidity on risk on a daily basis. The System provides the trading desk with a simulator, which assesses the impact of each new deal on total risk incurred.

We recently developed a VAR Real-time system, which recalculates the level of exposure of the Bank and the Funds to each of the risk factors chosen every 5 minutes. The system allows traders to assess their positions almost instantly, adjusting them to the maximum limits allowed.

Back-Test procedures will validate Banco Brascan’s Risk Management model, as results obtained statistically remain within expected parameters.

Banco Brascan’s chief market risk officer has been certified by PRMIA (Professional Risk Managers International Association) and by GARP (Global Association of Risk Professionals).