Barclays 2004 Annual Report Download - page 175

37 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
61 to 64. 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 2004 Yea r to 31st December 2003
Average High(a) Low(a) Average High(a) Low(a)
£m £m £m £m £m £m
Interest rate risk 25.0 53.6 15.1 21.0 34.1 13.6
Credit spread risk 22.6 32.9 16.0 16.2 29.2 8.9
Foreign exchange risk 2.4 7.4 0.9 2.3 5.0 1.0
Equities risk 4.2 7.9 2.2 2.6 4.9 1.5
Commodities risk 6.0 14.4 2.2 4.4 7.0 2.2
Diversification effect (25.9) n/a n/a (20.6) n/a n/a
Total DVaR(b) 34.3 46.8 24.0 25.9 38.6 17.6
Notes
(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.
Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table.
(b) The year-end Total DVaR for 2004 was £31.9m (2003: £37.2m).
The hedging tables below summarise, firstly, the unrecognised gains and losses on hedges at 31st December 2004 and 31st December 2003
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 2004 and 31st December 2003, pending their recognition in the profit and loss account.
Gains Losses Total net gains/(losses)
2004 2003 2004 2003 2004 2003
£m £m £m £m £m £m
Unrecognised gains and losses on hedges
At 1st January 2,752 3,290 (2,715) (2,353) 37 937
(Gains)/losses arising in previous years that
were recognised in 2004/2003 (1,240) (1,527) 1,122 999 (118) (528)
Brought forward gains/(losses) not recognised in 2004/2003 1,512 1,763 (1,593) (1,354) (81) 409
Gains/(losses) arising in 2004/2003 that were not
recognised in 2004/2003 849 989 (824) (1,361) 25 (372)
At 31st December 2,361 2,752 (2,417) (2,715) (56) 37
Of which:
Gains/(losses) expected to be recognised in 2005/2004 570 870 (324) (613) 246 257
Gains/(losses) expected to be recognised in 2006/2005 or later 1,791 1,882 (2,093) (2,102) (302) (220)
Deferred gains and losses on hedges carried forward in the
balance sheet
At 1st January 41 91 (92) (107) (51) (16)
Deferred (gains)/losses brought forward that were
recognised in income in 2004/2003 (32) (81) 55 64 23 (17)
Brought forward deferred gains/(losses) not recognised in 2004/2003 910 (37) (43) (28) (33)
Gains/(losses) that became deferred in 2004/2003 174 31 (172) (49) 2(18)
At 31st December 183 41 (209) (92) (26) (51)
Of which:
Gains/(losses) expected to be recognised in income in 2005/2004 61 19 (66) (39) (5) (20)
Gains/(losses) expected to be recognised in income in 2006/2005
or later 122 22 (143) (53) (21) (31)
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 £354m (2003: £87m) and losses of £427m (2003: £54m) were recognised in the year to 31st December 2004.
The disclosure of the fair value of financial instruments as required by FRS 13 is provided in Note 38 on pages 180 to 181.
Barclays PLC Annual Report 2004
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