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, 2008

 

Dec. 31, 2007

Notional amount
of hedging instruments used in cash flow hedges:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

5,801

 

9,014

 

506

 

15,321

 

12,983

Currency forwards

 

13,031

 

6,769

 

 

19,800

 

20,920

Currency options

 

4,435

 

10,421

 

 

14,856

 

4,723

Currency swaps

 

1,379

 

293

 

 

1,672

 

561

Commodity futures contracts

 

234

 

463

 

 

697

 

Notional amount
of other derivatives:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

11,271

 

30,620

 

409

 

42,300

 

34,094

Currency forwards

 

5,134

 

104

 

 

5,238

 

3,168

Currency swaps

 

3,224

 

1,578

 

 

4,802

 

2,039

Cross-currency swaps

 

822

 

636

 

 

1,458

 

2,689

Commodity futures contracts

 

280

 

151

 

 

431

 

1,502

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

 

2.971

 

1.750

 

2.960

 

8.050

 

22.800

 

2.575

 

3.750

 

0.810

 

0.954

Interest rate for one year

 

3.049

 

2.004

 

3.074

 

7.930

 

16.750

 

2.669

 

3.930

 

1.095

 

1.088

Interest rate for five years

 

3.234

 

2.053

 

3.136

 

7.670

 

16.500

 

2.825

 

2.810

 

1.920

 

0.910

Interest rate for ten years

 

3.738

 

2.474

 

3.426

 

7.970

 

16.500

 

3.158

 

3.250

 

2.590

 

1.223

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