conservative measure of market risk is therefore calculated than would otherwise be the case. BMO has not experienced a loss this year that exceeded the overall VaR measure in the trading and underwriting portfolios, as can be seen in the following diagram. Institutions Canada (OSFI), and consistent with the rules estab- lished by the 1998 Basel Capital Accord (1998 Accord), BMO maintained a “minimum capital requirement for market risk” for trading mark-to-market portfolios of $189 million as at October 31, 2002, down from $471 million at the end of 2001. This reduction in our regulatory capital is largely due to the introduction of our equity VaR model, and the implementation of correlation adjustments for interest rate and foreign ex- change positions. The most important risk measures are Market Value Exposure (MVE) and 12-month Earnings Volatility (EV). BMO’s aggregate MVE and EV exposure at October 31, 2002 are summarized in the following table. Measurement Aggregate MVE and EV Exposure for Trading and Underwriting and Structural Positions As at October 31 Market value 12-month (After-tax Canadian equivalent) ($ millions)*  exposure earnings volatilit y 2002 2001 2002 200 1 Trading and underwriting 13.4 13.9 18.7 17.5 Structural  290.0 233.2 42.4 79.6 Total 303.4 247.1 61.1 97.1 *Measured at a 99% confidence level. BMO’s trading and underwriting activities include portfolios that are marked to market daily, as well as some portfolios  (such as money market) that are subject to accrual accounting rules under generally accepted accounting principles. For these activities, VaR, an MVE measure, calculates the magnitude of BMO’s market risk. This measure calculates the maximum likely loss from portfolios for a holding period of one day at a 99% confidence level, that is, 99 days out of 100.  The VaR models determine economic market risk capital for each of the lines of business, and are also used to determine regulatory capital requirements under the standards of the  1998 Accord.  Market risk exposures arising from trading and underwriting activities are summarized in the following table. Trading and Underwriting VaR Summary na — not applicable *One-day measure using 99% confidence level. In determining VaR, we take only partial account of the corre- lations and offsets that may exist between certain portfolios and classes of risk, such as equity prices and interest rates. A more Trading revenues include amounts from all trading and under- writing activities whether accounted for on a mark-to-market basis or an accrual basis, and also include certain fees and com- missions directly related to those activities. Effective controls over the revaluation of trading and under- writing portfolios and the determination of daily revenue from these activities enable us to monitor the revenue generated by each of the lines of business in relation to their business strate- gies and their level of market risk.The average daily revenue from trading and underwriting activities for 2002 was $3.8 million. The distribution of daily trading revenue is provided in the dia- gram below.  For capital calculation purposes, longer holding periods and/or higher confidence levels are used than are employed for day-to- day risk management. We also measure exposure to concentrations of market risk, such as changes in particular interest rates, foreign exchange rates, equity or commodity prices, and their related implied volatilities. Models used to determine EV exposures are the same as or simi- lar to those used to determine VaR exposures. —40 —30 —20 —10 0 10 20 GLYPH<CR>GLYPH<CR> Daily Trading Revenue and VaRGLYPH<CR> For the year ended October 31, 2002 ($ millions) Daily trading revenue Value at Risk Jan 31 Nov 1 Jul 31 Oct 31 Apr 30 0  20  40  60 10 30 50 18 16 14 12 10 8 6 4 2 0 ( 2 ) ( 4 ) ( 6 ) ( 8 ) ( 10 ) ( 12 ) ( 14 ) Frequency Distribution of Daily Trading RevenueGLYPH<CR> For the year ended October 31, 2002 Daily trading revenue ($ millions) Number of days BMO FINANCIAL GROUP ANNUAL REPORT 2002 31 For the year ended October 31, 2002 (Pre-tax Canadian equivalent) ($ millions)* Year-end Average High Lo w Interest rate 16.9 23.3 36.8 13.4 Foreign exchange 3.8 3.5 6.8 1.5 Commodity 1.1 1.8 4.2 0.8 Equity 6.6 5.0 16.8 1.6 Correlation effect (5.2) (3.9) na na Total 23.2 29.6 45.8 17.6