Common use of Value at Risk Limits Clause in Contracts

Value at Risk Limits. In the Oil Supply area, Xxxxxxx currently applies a $1.5 million daily “Value-at-Risk” (VaR) metric to the combination of the System Optimization and Discretionary portfolios. This limit is based on a 95% confidence interval and a one-day holding period to calculate daily VaR. The Natural Gas Supply group uses a $0.75 million daily VaR for its daily Natural Gas Supply/ Trading positions, again based on a 95% confidence interval and a one-day holding period. The System Supply activities that support the Oil business (primarily Xxxxxxx-owned terminals) requirements are not subject to a daily VaR limit. In contrast, the complete Natural Gas Supply / Trading positions are part of the daily VaR calculation, as they simply represent the existing imbalances that exist within the daily position balancing activities, since there are no discretionary positions taken. If there are any instances where the daily VaR calculation is unavailable, the Middle Office will rely on the previous calculation and also consider the approximate impact of any major position or market price changes when assessing VaR compared to the approved limit.