Barclays 2003 Annual Report Download - page 158

Notes to the Accounts
For the Year Ended 31st December 2003
45 Derivatives and other financial instruments (continued)
Daily Value at Risk
The Daily Value at Risk (DVaR) methodology of estimating potential losses arising from the Group’s exposure to market risk is explained on pages 60 to
62. The models used in estimating potential losses are based on past movements and may not be indicative of future market conditions. The following
table shows an analysis of DVaR for the market risk exposures in Barclays Capital as an average for the year and the high and low during the year.
Year to 31st December 2003 Year to 31st December 2002
Average High(a) Low(a) Average High(a) Low(a)
£m £m £m £m £m £m
Interest rate risk 21.0 34.1 13.6 21.7 34.5 10.0
Credit spread risk 16.2 29.2 8.9 9.4 12.5 6.0
Foreign exchange risk 2.3 5.0 1.0 2.9 4.4 1.9
Equities risk 2.6 4.9 1.5 3.6 5.4 2.1
Commodities risk 4.4 7.0 2.2 1.8 3.3 0.8
Diversification effect (20.6) n/a n/a (16.2) n/a n/a
Total DVaR 25.9 38.6 17.6 23.2 35.7 13.4
Note
(a) The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as
a whole. A corresponding diversification effect cannot be calculated and is therefore omitted from the above table. DVaR at 31st December 2003
was £37.2m (2002: £25.8m).
The hedging tables below summarise, firstly, the unrecognised gains and losses on hedges at 31st December 2003 and 31st December 2002 and the
movements therein during the year, and, secondly, the deferred gains and losses on hedges carried forward in the balance sheet at 31st December
2003 and 31st December 2002, pending their recognition in the profit and loss account.
Gains Losses Total net gains/(losses)
2003 2002 2003 2002 2003 2002
£m £m £m £m £m £m
Unrecognised gains and losses on hedges
At 1st January 3,290 2,441 (2,353) (1,738) 937 703
(Gains)/losses arising in previous years that
were recognised in 2003/2002 (1,527) (1,369) 999 890 (528) (479)
Brought forward gains/(losses) not recognised in 2003/2002 1,763 1,072 (1,354) (848) 409 224
Gains/(losses) arising in 2003/2002 that were not
recognised in 2003/2002 989 2,218 (1,361) (1,505) (372) 713
At 31st December 2,752 3,290 (2,715) (2,353) 37 937
Of which:
Gains/(losses) expected to be recognised in 2004/2003 870 1,101 (613) (664) 257 437
Gains/(losses) expected to be recognised in 2005/2004 or later 1,882 2,189 (2,102) (1,689) (220) 500
Deferred gains and losses on hedges carried forward in the balance sheet
At 1st January 91 49 (107) (77) (16) (28)
Deferred (gains)/losses brought forward that were
recognised in income in 2003/2002 (81) (31) 64 56 (17) 25
Brought forward deferred gains/(losses)
not recognised in 2003/2002 10 18 (43) (21) (33) (3)
Gains/(losses) that became deferred in 2003/2002 31 73 (49) (86) (18) (13)
At 31st December 41 91 (92) (107) (51) (16)
Of which:
Gains/(losses) expected to be recognised in income in 2004/2003 19 72 (39) (61) (20) 11
Gains/(losses) expected to be recognised in income in 2005/2004 or later 22 19 (53) (46) (31) (27)
Where a non-trading derivative no longer represents a hedge because the underlying non-trading asset, liability or position has been de-recognised
or transferred into a trading portfolio, it is restated at fair value and any resultant gains or losses taken directly to the profit and loss account. Gains
of £87m (2002: £66m) and losses of £54m (2002: £39m) were recognised in the year to 31st December 2003. The disclosure of the fair value of
financial instruments as required by FRS 13 is provided in Note 46 on pages 163 to 164.
156