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Newell Rubbermaid Inc. 2010 Annual Report
40 NEWELL RUBBERMAID 2010 Annual Report
>
Value at Risk
The amounts shown below represent the estimated potential economic loss that the Company could incur from adverse changes
in either interest rates or foreign exchange rates using the value-at-risk estimation model. The value-at-risk model uses historical
foreign exchange rates and interest rates to estimate the volatility and correlation of these rates in future periods. It estimates
a loss in fair market value using statistical modeling techniques that are based on a variance/covariance approach and includes
substantially all market risk exposures (specifically excluding equity-method investments). The fair value losses shown in the
table below represent the Company’s estimate of the maximum loss that could arise in one day. The amounts presented in the
table are shown as an illustration of the impact of potential adverse changes in interest and foreign currency exchange rates. The
following table sets forth the one day value-at-risk as of and for the year ended December 31, (in millions, except percentages):
2010 December 31, 2009 December 31, Confidence
Market Risk(1) Average 2010 Average 2009 Level
Interest rates $ 9.8 $ 11.5 $ 12.2 $ 9.6 95%
Foreign exchange $ 12.2 $ 11.2 $ 12.8 $ 12.3 95%
(1) The Company generally does not enter into material derivative contracts for commodities; therefore, commodity price risk is not shown because the amounts
are not material.
The 95% confidence interval signifies the Company’s degree of confidence that actual losses would not exceed the estimated
losses shown above. The amounts shown here disregard the possibility that interest rates and foreign currency exchange rates
could move in the Company’s favor. The value-at-risk model assumes that all movements in these rates will be adverse. Actual
experience has shown that gains and losses tend to offset each other over time, and it is highly unlikely that the Company could
experience losses such as these over an extended period of time. Additionally, since the Company operates globally, and therefore,
among a broad basket of currencies, its foreign currency exposure is diversified. These amounts should not be considered projections
of future losses, because actual results may differ significantly depending upon activity in the global financial markets.