TABLE A.17 Contingent liabilities (VaR) per product and at portfolio level in Italy

The diversification effect, which arises from the non-perfect correlation among products, signifi- cantly reduces Contingent Liabilities. The portfolio CL without diversification is calculated as the sum of the VaR of each crop, a highly conservative estimate that implicitly assumes that all products are per- fectly positively correlated. In contrast, the portfolio VaRs were estimated considering the diversification effect among products. When crops are not perfectly correlated, adverse events affecting one product are less likely to impact others to the same extent, resulting in lower overall risk for the portfolio. For exam- ple, at a 1% exceedance probability (1-in-100), the VaR without diversification is EUR 6,657 million, while 3,784 million. This pattern holds across all exceedance probabilities, with the diversification benefit rang-