Volvo 2000 Annual Report Download - page 75

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73
Total outstanding currency risk related contracts
December 31, 1998 December 31, 1999 December 31, 2000
Notional Book Estimated Notional Book Estimated Notional Book Estimated
amount value fair value amount value fair value amount value fair value
Foreign exchange
contracts - commercial
exposure 6
– receivable
position 71,381 145 2,189 69,531 91 4,044 19,017 71 1,513
– payable position 93,215 (491) (3,254) 107,509 (203) (5,628) 24,910 (89) (2,817)
Foreign exchange
contracts - financial
exposure 6
– receivable
position – – – – – – 32,741 34 1,046
– payable position – – – – – – 21,668 (76) (2,894)
Options – purchased
– receivable
position 4,745 – 193 4,434 – 67 808 – 2
– payable position 324 – (5) 392 – (4) 1,736 (3) (4)
Options – written
– receivable
position 2,867 – 38 3 — 0 385 – 0
– payable position 3,147 – (42) 3,415 — (49) 568 – 0
Total (346) (881) (112) (1,570) (63) (3,154)
6 As of 2000, the foreign exchange contracts are divided between commercial and financial exposure.
The notional amount of the derivative contracts represents the gross contract amount outstanding. To determine the estimated fair value,
the major part of the outstanding contracts have been marked to market. Discounted cash flows have been used in some cases.
Interest-rate risks
Interest-rate risks relate to the risk that changes in inter-
est-rate levels affect the Group’s profit. By matching
fixed-interest periods of financial assets and liabilities,
Volvo reduces the effects of interest-rate changes.
Interest-rate swaps are used to change the interest-rate
periods of the Group’s financial assets and liabilities.
Exchange-rate swaps make it possible to borrow in
foreign currencies in different markets without incurring
currency risks.
Volvo also holds standardized futures and forward-
rate agreements. The majority of these contracts are
used to secure interest levels for short-term borrowing
or placement.
Liquidity risks
Volvo ensures maintenance of a strong financial position
by continuously keeping a certain percentage of sales in
liquid assets. A proper balance between short- and long-
term borrowing, as well as the ability to borrow in the
form of credit facilities, are designed to ensure long-term
financing.
Volvo Group outstanding interest-risk related contracts
December 31, 1998 December 31, 1999 December 31, 2000
Notional Book Estimated Notional Book Estimated Notional Book Estimated
amount value fair value amount value fair value amount value fair value
Interest-rate swaps 7
– receivable
position 42,273 67 1,362 87,647 486 3,055 64,345 561 2,990
– payable position 65,266 (624) (1,519) 94,934 (373) (3,461) 57,488 (366) (2,969)
Forwards and futures
– receivable
position 240,245 – 1,781 231,907 – 99 174,576 0 201
– payable position 262,968 (54) (1,855) 220,640 – (61) 201,657 (28) (247)
Options purchased,
caps and floors
– receivable
position – – – – – – 52 0 1
– payable position – – – – – – – – –
Options written,
caps and floors
– receivable
position – – – – – – – – –
– payable position 420 (50) (50) – – – 55 0 0
Total (661) (281) 113 (368) 167 (24)
7 As from 2000 interest-rate swaps in foreign currencies are reported as interest-risk related contracts and are included in interest-
rate swaps. Comparative figures for 1998 and 1999 have been calculated.