Company: BBD
Filing Date: 2025-03-31
Form Type: 20-F
Source: 0001292814-25-001244
Chunk: 374

Company: BANK BRADESCO
Filing Date: 2025-03-31
Form: 20-F
Item: Item 19
Chunk 374
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 31, 2023  
  Derivative financial instruments                                  16,240,611                15,542,220            
  Total                                                             16,240,611                15,542,220            

  DERIVATIVE FINANCIAL INSTRUMENTS  

Bradesco carries out transactions involving
derivative financial instruments, which are recognized in the statement of financial position, to meet its own needs in managing its global
exposure, as well as to meet its customers’ requests, in order to manage their exposure. These operations involve a range of derivatives,
including interest rate swaps, currency swaps, futures and options. Bradesco’s risk management policy is based on the utilization
of derivative financial instruments mainly to mitigate the risks from operations carried out by the Bank and its subsidiaries.

Derivative financial instruments are recognized
in the consolidated statement of financial position at their fair value. Fair value is generally based on quoted market prices or quotations
for assets or liabilities with similar characteristics. Should market prices not be available, fair values are based on dealer quotations,
pricing models, discounted cash flows or similar techniques for which the determination of fair value may require judgment or significant
estimates by Management.

Market-derived information is used in
the determination of the fair value of derivative financial instruments. The fair value of swaps is determined by using discounted cash
flow modeling techniques that use yield curves, reflecting adequate risk factors. The information to build yield curves is mainly obtained
from B3 (the Brazilian securities, commodities and futures exchange), and the domestic and international secondary market. These yield
curves are used to determine the fair value of currency swaps, interest rate and other risk factor swaps. The fair value of forward and
futures contracts is also determined based on market price quotations for derivatives traded on an exchange or using methodologies similar
to those outlined for swaps. The fair values of credit derivative instruments are determined based on market price quotation or prices
received from specialized entities. The fair value of options is determined based on mathematical models, such as Black & Scholes,
using yield curves, implied volatilities and the fair value of the underlying assets. Current market prices are used to calculate volatility.
To estimate the fair value of the over-the-counter (OTC) financial derivative instruments, the credit quality of each counterparty is
also taken into account, based on an expected loss for each derivative portfolio (Credit valuation adjustment).

The derivative financial instruments held
by Bradesco in Brazil primarily consist of swaps and futures and are registered with B