Chrysler 2007 Annual Report Download - page 147

146 Fiat Group Consolidated Financial Statements at December 31, 2007 - Notes
22. Other financial assets and Other financial liabilities
These items include the measurement at fair value of derivative financial instruments at the balance sheet date. In particular:
At December 31, 2007 At December 31, 2006
Positive Negative Positive Negative
(in millions of euros) fair value fair value fair value fair value
Fair value hedge:
- Currency risk - Forward contracts and Currency swaps – –1(1)
- Interest rate risk - Interest rate swaps and Forward rate agreement 110 (6) 129 (11)
- Interest rate and currency risk - Combined interest rate and currency swaps 59 – ––
- Other derivatives –––(5)
Total Fair value hedges 169 (6) 130 (17)
Cash flow hedge:
- Currency risks - Forward contracts, Currency swaps and Currency options 278 (65) 129 (61)
- Interest rate risk - Interest rate swaps and Forward rate agreement 31 (62) 15 (8)
- Interest rate and currency risk - Combined interest rate and currency swaps 31 – ––
- Other derivatives –(2) ––
Total Cash flow hedges 340 (129) 144 (69)
Derivatives for trading 194 (53) 108 (19)
Other financial assets/(liabilities) 703 (188) 382 (105)
The fair value of derivative financial instruments is determined by taking into consideration market parameters at the balance
sheet date and using valuation techniques widely accepted in the financial business environment. In particular:
■the fair value of forward contracts and currency swaps is determined by taking the prevailing exchange rate and interest rates in
the two currencies at the balance sheet date;
■the fair value of currency options is determined using valuation techniques based on the Black-Scholes model or binomial models
and market parameters at the balance sheet date (in particular exchange rates, interest rates and volatility rates);
■the fair value of interest rate swaps and forward rate agreements is determined by using the discounted cash flow method;
■the fair value of derivative financial instruments acquired to hedge interest rate risk and currency risk is determined using the
exchange rates prevailing at the balance sheet date and the discounted cash flow method;
■the fair value of equity swaps is determined using market prices at the balance sheet date;
■the fair value of the equity option is determined using the Black-Scholes or binomial models, with market parameters (in
particular the price of the underlying, interest rates, expected future dividends and volatility) being measured at the balance sheet
date;
■the fair value of derivatives hedging commodity price risk is determined by using the discounted cash flow method, taking the
market parameters at the balance sheet date (and in particular the future price of the underlying and interest rates).