32.5. Methods for monitoring hedge effectiveness


In the Volkswagen Group, hedge effectiveness is assessed prospectively using the critical terms match method and using statistical methods in the form of a regression analysis. Retrospective analysis of effectiveness uses effectiveness tests in the form of the dollar offset method or a regression analysis.

Under the dollar offset method, the changes in value of the hedged item expressed in monetary units are compared with the changes in value of the hedging instrument expressed in monetary units.

Where regression analysis is used, the change in value of the hedged item is presented as an independent variable, and that of the hedging instrument as a dependent variable. Currency transactions are classified as effective hedge relationships if they have sufficient coefficients of determination and slope factors.

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NOTIONAL AMOUNT OF DERIVATIVES

 

 

 

 

 

 

Remaining term

 

Total notional amount

 

Total notional amount

€ million

 

under
one year

 

within one to five years

 

over
five years

 

Dec. 31, 2009

 

Dec. 31, 2008

Notional amount of hedging instruments used in cash flow hedges:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

3,848

 

6,297

 

875

 

11,020

 

15,321

Currency forwards

 

13,199

 

7,410

 

72

 

20,681

 

19,800

Currency options

 

374

 

3,310

 

 

3,685

 

14,856

Currency swaps

 

1,508

 

36

 

 

1,543

 

1,672

Cross-currency swaps

 

193

 

2,297

 

143

 

2,633

 

Commodity futures contracts

 

272

 

649

 

72

 

994

 

697

Notional amount of other derivatives:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

14,496

 

25,636

 

689

 

40,820

 

42,300

Interest rate option contracts

 

93

 

102

 

67

 

262

 

Currency forwards

 

1,077

 

237

 

 

1,314

 

5,238

Currency swaps

 

4,529

 

1,154

 

 

5,683

 

4,802

Cross-currency swaps

 

706

 

2,406

 

 

3,112

 

1,458

Commodity futures contracts

 

198

 

176

 

 

373

 

431

In addition to the derivatives used for hedging foreign currency, interest rate and price risk, at the reporting date the Group held options on equity instruments with a notional amount of €11.1 billion whose remaining maturity is more than one year.

The hedged items in cash flow hedges are expected to be realized in accordance with the maturity buckets of the hedges reported in the table.

The fair values of the derivatives are estimated using market data at the balance sheet date as well as by appropriate valuation techniques. The following term structures were used for the calculation:

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in %

 

EUR

 

USD

 

GBP

 

MXN

 

RUB

 

SEK

 

CZK

 

CHF

 

JPY

Interest rate
for six months

 

0.994

 

0.430

 

0.839

 

4.840

 

7.460

 

0.698

 

1.820

 

0.338

 

0.480

Interest rate
for one year

 

1.248

 

0.984

 

1.248

 

5.060

 

7.360

 

1.005

 

2.130

 

0.638

 

0.694

Interest rate
for five years

 

2.805

 

2.929

 

3.390

 

7.239

 

7.950

 

2.850

 

2.990

 

1.710

 

0.696

Interest rate
for ten years

 

3.598

 

3.918

 

4.088

 

7.965

 

8.200

 

3.583

 

3.520

 

2.500

 

1.408

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