Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 571

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 571
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                 |      |                 |
| Risk-related                          |  634 |              35 |  692 |              41 |
| –  bid-offer                          |  366 |               2 |  414 |               — |
| –  uncertainty                        |   98 |               3 |   75 |               3 |
| –  credit valuation adjustment        |  126 |              27 |  164 |              35 |
| –  debit valuation adjustment         |  -24 |               — |  -54 |               — |
| –  funding fair value adjustment      |   68 |               3 |   93 |               3 |
| Model-related                         |   50 |               — |   63 |               — |
| –  model limitation                   |   50 |               — |   63 |               — |
| Inception profit (Day 1 P&L reserves) |   92 |               — |   86 |               — |
| At 31 Dec                             |  776 |              35 |  841 |              41 |

The net reduction in fair value adjustments was predominantly driven by changes to exposure, and tightening of credit and liquidity market spreads. Bid-offer IFRS 13 ‘Fair Value Measurement’ requires the use of the price within the bid-offer spread that is most representative of fair value. Valuation models will typically generate mid-market values. The bid-offer adjustment reflects the extent to which bid-offer costs would be incurred if substantially all residual net portfolio market risks were closed using available hedging instruments or by disposing of or unwinding the position. Uncertainty Certain model inputs may be less readily determinable from market data and/or the choice of model itself may be more subjective. In these circumstances, an adjustment may be necessary to reflect the likelihood that market participants would adopt more conservative values for uncertain parameters and/or model assumptions than those used in HSBC’s valuation model. Credit and debit valuation adjustments The credit valuation adjustment (‘CVA’) is an adjustment to the valuation of over-the-counter (‘OTC’) derivative contracts to reflect the possibility that the counterparty may default and that HSBC may not receive the full market value of the transactions. The debit valuation adjustment (‘DVA’) is an adjustment to the valuation of OTC derivative contracts to reflect the possibility that HSBC may default, and that it may not pay the full market value of the transactions. The DVA considers the