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Market risks Dresdner Bank uses a proprietary value-at-risk model that takes into account all aspects of general and specific risks. Value-at-risk is defined as the potential loss which may oc- cur during a specific period of time and with a given confidence level. In 1998, the German Federal Supervisory Authority for Financial Service Providers (BaFin) first approved Dresdner Bank’s value-at-risk model for purposes of reporting in accor- dance with Principle I of the German Banking Act. It also ap- proved the improvements made in 2001 and 2002. The value- at-risk data used to calculate capital adequacy requirements for regulatory purposes must take into account potential market movements within a confidence level of 99 percent, based on an assumed holding period of 10 trading days. The value-at-risk model is complemented by stress testing. 

## Value-at-risk statistics 

(99 % confidence level, 10-day holding period) 

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1) No diversification effect can be taken into account since the maximum and minimum values were measured at different dates. 

For purposes of setting internal limits and risk determination, we calculate value-at-risk with a confidence level of 95 percent and a one-day holding period. Unlike the value-at-risk calcula- tion required by the supervisory authority, which is based on market data from the past, we thus assign greater weight to the most recent market fluctuation. This ensures that value-at-risk data more accurately reflect current market developments. 

