Berkshire Hathaway 1999 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 1999 Berkshire Hathaway annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 74

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74

33
(7) Finance and financial products businesses (Continued)
Interest rate, currency and equity swaps are agreements between two parties to exchange, at particular intervals,
payment streams calculated on a specified notional amount. Interest rate, currency and equity options grant the purchaser
the right, but not the obligation, to either purchase from or sell to the writer a specified financial instrument under agreed
terms. Interest rate caps and floors require the writer to pay the purchaser at specified future dates the amount, if any, by
which the option’s underlying m arket interest rate exceeds the fixed cap or falls below the fixed floor, applied to a notional
amount.
Futures contracts are commitments to either purchase or sell a financial instrument at a future date for a specified price
and are generally settled in cash. Forward-rate agreements are financial instruments that settle in cash at a specified future
date based on the differential between agreed interest rates applied to a notional amount. Foreign exchange contracts
generally involve the exchange of two currencies at agreed rates on a specified date; spot contracts usually require the
exchange to occur within two business days of the contract date.
A summary of notional amounts of derivative contracts at December 31, 1999 and 1998 is included in the table below.
For these transactions, the notional amount represents the principal volume, which is referenced by the counterparties in
computing payments to be exchanged, and are not indicative of the Company’s exposure to market or credit risk, future cash
requirements or receipts from such transactions.
December 31, 1999 December 31, 1998
(in millions) (in millions)
Interest rate and currency swap agreements .................... $531,645 $514,935
Options written ........................................ 121,683 88,245
Options purchased ..................................... 151,006 90,826
Financial futures contracts:
Commitments to purchase ............................... 32,377 26,041
Commitments to sell ................................... 11,368 6,872
Forward - rate agreements ................................ 5,164 24,579
Foreign exchange spot and forward contracts .................. 10,430 14,794
The following tables discloses the net fair value or carrying amount at December 31, 1999 and 1998 as well as the
average fair value during 1999 for each class of derivative financial contract held or issued by GRFP.
December 31, 1999 December 31, 1998
Asset Liability Asset Liability
(in millions) (in millions)
Interest rate and foreign currency swaps .................... $22,593 $22,819 $25,963 $25,445
Interest rate and foreign currency options ................... 5,980 5,714 4,338 4,439
Gross fair value ...................................... 28,573 28,533 30,301 29,884
Adjustment for counterparty netting ....................... (22,692)(22,692)(24,067)(24,067)
Net fair value ....................................... 5,881 5,841 6,234 5,817
Security receivables/payables ............................ — 89 — 17
Trading account assets/liabilities ......................... $ 5,881 $ 5,930 $ 6,234 $ 5,834
Average 1999
Asset Liability
(in millions)
Interest rate and foreign currency swaps .................... $23,213 $23,071
Interest rate and foreign currency options ................... 4,657 4,687
Gross fair value ...................................... 27,870 27,758
Adjustment for counterparty netting ....................... (22,579)(22,579)
Net fair value ....................................... 5,291 5,179
Security receivables/payables ............................ 85 111
Trading account assets/liabilities ......................... $ 5,376 $ 5,290