INFORMACIÓN CUALITATIVA


With the purpose of having a higher degree of competence, and considering the increasing complexity and volatilily of financial markets, Casa de Bolsa Finamex has reinforced its risk analysis structure.

We developed systems to monitor and optimize in a timely and complete manner the risk and return relationship by establishing policies, limits and controls for our different business units. Additionally, we maintain higher levels of capitalization than those required by regulatory institutions to protect our investments.

Risk control is managed by the following internal bodies:
BOARD OF DIRECTORS
Authorizes the methodology and maximun levels of risk tolerance.

Checks positions and risk measurements on a quarterly basis.
RISK COMMITEE
Monthly meetings.

Proposes the methodology and the maximum levels of risk tolerance to be approved by the Board od Directors.

Authorizes credit lines,counterparty lines, and individual limits for operations.

Monitors risk limits and reports any excess to the Board.
RISK MANAGEMENT UNIT
Identifies, quantities and reports risk exposures on a daily basis.

Monitors and enforces individual risk limits and global risk limits.

Risk is measured and quantified by using tools such as "Var Global", "SIF" internal database that uses the following sources of information:
Bloomberg, Valmer and the websites of regulatory institutions.

REVIEW METHODOLOGY PER TYPE OF MARKET RISKS


The methodology for quantifying and measuring Market risks is based on four processes:

VALUE AT RISK - VAR
Finamex uses VaR to quantify market risk. VaR must be read as the maximum expected loss, at a certain confidence level, and within a given time horizon. Finamex uses the 99% confidence level, and onde day horizon as VaR parameters.On the other hand, Finamex calculates VaR through the historical method, and uses 500 real data and scenarios respectively.
DVO1 ANALYSIS
DV01 is calculated on a daily basis, by using correlation and liquidity indices to calculate the resulting loss of a single basis point movement in the risk factors of each security.
STRESS ANALYSIS
Finamex performs monthly stress tests to look for maximum expected losses based on the following: historical variations with one-day and five-day movements, considering 1100 observations and available historic data from October 1st 2008 to date.

The Board establishes limits for its VaR and stress tetst exposures in proportion to the company´s global capitalization levels.
BACK TESTING
Finamex performs back testing on a daily basis. Risk estimations calculated a priori with the Value al Risk methodology are compared to observed results (a posteriori) for each security using a 99% confidence level. Then, an evaluation is made to reassure that the VaR limit is not exceeded by more than 1% of the observations.

Results are reported monthly to the Risk Committee.

CREDIT RISK


Finamex uses parametric models based on credit ratings and financial information of the analyzed institutions.

There are global counter-party limits for intermediaries with wich Money, Derivatives and Exchange market transactions are performed; wich are entered, validated and controlled by the systems.

Credit lines and counter-party credit lines are authorized by the Risk Committee.

LIQUIDITY RISKS


The Risk Committee sets limits on the maximum potential loss, under stress scenarios, as a proportion of the Brokerage Firms Global Capital, because Liquidity risk calculation is addressed by establishing that the probability of occurrence of liquidity risk is much higher in stress circumstances for the risk factors than when there is stanility in the markets.

Limits have been established regarding the Brokerage Firms Global Capital related to potential losses under stress scenarios that limit the funding Risk of positions in situations that represent major unrealized losses.

In addition, a report on our settlements for the Derivative Market, classified into type of underlying and deadlines to perform (from 24 hours to 3 months), is performed and considered within the firm's Cash Flow.

OPERATIONAL RISK


The risks that may occur as a result of daily transactions are controlled as follows:

    1. Internal Audit Reviews, whor's work program is authorized by the Board of Directors and keeps a record of every observation, recommendation and its compliance level.
       
    2. Operating manuals for all relevant areas of the Brokerage Firm.
       
    3. Contingency plans to respond to a number of extraordinary situations.
       
    4. Documentation of excesses, errors and legal problems.
       
    5. The keeping of records in wich different departments log operational errors, wich are reviews on a monthly basis by the Risk Committee and teh people responsible for the department, who implement new procedures, controls and/or actions to minimize the occurrence of said events, wich have not generated any monetary loss up to date.
       
    6. There are established limits for technological risk, wich have not been exceeded: the Risk Committee thoroughly reviews the status of such risks on a quarterly basis.
       
    7. The Risk Committee reviews the status of legal risk, as are details of the trials faced quarterly.
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5209 2080 y 01 800 623 6822

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