Dealers' VAR increases during 2001, says BofE report

Average value-at-risk (VAR) levels among leading dealers has increased over 2001, but despite increased vol across equity and rates markets post-September 11, large trading losses appear to have been avoided, according to the Bank of England’s Financial Stability Review – published yesterday.

For several dealers, market risk in trading activities, as measured by average VAR as a proportion of shareholders’ funds, was higher in the first half of 2001 compared with 2000. Goldman Sachs’ and Morgan Stanley’s VAR increased most in absolute and relative terms over this period, but figures have not reached the highs of 1999 - when prop trading began its downturn.

However, European insurance and pension firms have been more susceptible to market risk over the past year, and hedging of

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