Company: BCDRF
Filing Date: 2025-07-31
Form Type: 6-K
Source: 0000891478-25-000113
Chunk: 180

Company: Banco Santander, S.A.
Filing Date: 2025-07-31
Form: 6-K
Chunk 180
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, sensitivities and results

Santander uses positions to quantify the market values of transactions in the portfolio, grouped by main risk factor and considering the delta value of any futures or options. We can express risk positions in our subsidiaries' base currency and in the currency used for standardized information. We monitor positions daily to detect incidents and correct them immediately.

Measurements of market risk sensitivity estimate the variation of an instrument or portfolio's market value to changes in a risk factor with analytical approximations given through partial derivatives or a complete revaluation of the portfolio.

The daily profit and loss (P&L) statement prepared by the market risk function is an excellent indicator of the impact of changes of financial variables on portfolios.

e) Derivatives activities and credit management

We run controls over derivative activities and credit management daily with specific measures due to their atypical nature. We control and monitor underlying asset's sensitivity to price movements (Delta and Gamma), volatility (Vega) and time (Theta). Also, we systematically review measurements such as sensitivity to the spread, jump-to-default and concentrations of positions by rating.

For credit risk in trading portfolios, we also calculate Incremental Risk Charge (IRC), an additional metric recommended by the Basel Committee and current regulations. IRC covers default risks and rating migrations not adequately captured in VaR through variations in credit spreads.

We apply this metric to government and corporate bonds, derivatives on bonds (forward, options, etc.) and credit derivatives (credit default swaps, asset backed securities, etc.). We calculate IRC using direct measurements of loss distribution tails at an appropriate percentile (99.9%), over a one-year horizon. We follow the Montecarlo methodology, applying one million simulations.

f) Credit Valuation Adjustment (CVA) and Debt Valuation Adjustment (DVA)

Santander calculates trading portfolio results with credit valuation adjustment (CVA) and debit valuation adjustment (DVA). The CVA is for over the-counter (OTC) derivatives and results from the risk associated with the credit exposure assumed with each counterparty.

The CVA for a particular counterparty is the total CVA for all its maturities. To calculate it, we consider inputs such as expected exposure, loss given default, probability of default and a discount factor curve.

DVA is similar to CVA but results from the risk our counterparties assume in OTC derivatives traded with us.

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#### C.

#### Key metrics (Trading Market Risk)
Market volatility in the first half of