Mercedes 2008 Annual Report Download - page 206

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The following table provides an insight into how the liquidity
situation of the Group is affected by the cash flows from financial
liabilities as of December 31, 2008.
Finance market risks
The global nature of its businesses exposes Daimler to signifi-
cant market risks resulting from fluctuations in foreign currency
exchange rates and interest rates. In addition, the Group is
exposed to market risks in terms of commodity price risk associ-
ated with its business operations, which the Group hedges par-
tially through derivative financial instruments. The Group is also
exposed to equity price risk. Market risks may adversely affect
the Group’s financial position, cash flows and profitability.
Daimler manages market risks to minimize the impact of fluctua-
tions in foreign exchange rates, interest rates and commodity
prices on the results of the Group and its segments. The Group
calculates its overall exposure to these market risks to provide
the basis for hedging decisions, which include the selection of
hedging instruments and the determination of hedging volumes
and the corresponding periods. Decisions regarding the manage-
ment of market risks resulting from fluctuations in foreign
exchange rates, interest rates and commodity prices as well as
decisions on asset-liability management, are regularly made
by the relevant Daimler risk management committees.
As part of its risk management system, Daimler employs value at
risk analyses as recommended by the Bank for International
Settlements. In performing these analyses, Daimler quantifies its
market risk exposure to changes in foreign currency exchange
rates, interest rates and equity prices on a continuous basis by
predicting the maximum loss over a target time horizon (holding
period) and confidence level.
The value at risk calculations employed:
– express potential losses in fair values, and
– assume a 99% confidence level and a holding period of
five days.
Daimler calculates the value at risk for exchange rate, interest rate
and equity price risk according to the variance-covariance
approach. The value at risk calculation method for commodity
price risk is based on the Monte Carlo simulation.
When calculating the value at risk by using the variance-covariance
approach, Daimler first computes the current fair value of the
Group’s financial instruments portfolio. Then the sensitivity of the
portfolio value to changes in the relevant market risk factors,
such as particular foreign currency exchange rates or interest
rates of specific maturities, is quantified. Based on expected
volatilities and correlations of these market risk factors which
are obtained from the RiskMetrics™ dataset, a statistical
distribution of potential changes in the portfolio value at the end
of the holding period is computed. The loss which is reached
or exceeded with a probability of only 1% can be deduced from
this calculation and represents the value at risk.
≥ 201420132012201120102009Total
4,740
2
–
141
–
4,883
3,564
15
–
36
–
3,615
5,084
106
–
54
19
5,263
10,703
121
–
173
869
11,866
12,723
405
3
938
47
14,116
29,183
818
6,475
7,619
601
44,696
65,997
1,467
6,478
8,961
1,536
84,439
Financing liabilities2
Derivative financial instruments3
Trade payables4
Other financial liabilities excluding derivatives
Irrevocable loan commitments of the Daimler Financial
Services segment and of Daimler AG5
Total
1. The values were calculated as follows:
(a) If the counterparty can request payment at different dates, the liability is included on the basis of the earliest date on which Daimler can be required to pay. The customer deposits of Mercedes-Benz
Bank are considered in this analysis to mature within the first year.
(b) The cash flows of floating interest financial instruments are estimated on the basis of forward rates.
2. The stated cash flows of financing liabilities consist of their undiscounted principal and interest payments.
3. The undiscounted sum of the net cash outflows of the derivative financial instruments are shown for the respective year. For single time bands, this may also include negative cash flows from derivatives
with an overall positive fair value.
4. The cash outflows of trade payables are undiscounted.
5. The maximum available amounts are stated.
in millions of €
Liquidity runoff 1