Mercedes 2001 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2001 Mercedes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

66 Analysis of the Financial Situation
The average and period-end values-at-risk of
derivative financial instruments used to hedge exchange
rate risk decreased in 2001, primarily as a result of
lower foreign exchange rate volatilities and a slightly
decreased foreign exchange derivatives volume.
DaimlerChrysler changed the presentation of
exchange rate risk from the sensitivity analysis used
in previous reports to value-at-risk to have a uniform
method for the measurement of exchange rate risk,
interest rate risk and equity price risk that allows
comparisons between the different types of market risks.
Asset and liability management. DaimlerChrysler holds
a variety of interest rate sensitive assets and liabilities
to manage its operative and strategic liquidity require-
ments. In addition, a substantial volume of interest rate
sensitive assets and liabilities is related to the leasing
and sales financing business. In particular, the Group’s
leasing and sales financing business enters into trans-
actions with customers primarily resulting in fixed rate
receivables. DaimlerChrysler’s general policy is to
match funding in terms of maturities and interest rates.
However, for a limited portion of the receivables port-
folio funding does not match in terms of maturities and
interest rates. As a result, DaimlerChrysler is exposed
to risks due to changes in interest rates.
DaimlerChrysler coordinates funding activities of
the industrial business and financial services on the
Group level. It uses interest rate derivative instruments
such as interest rate swaps, forward rate agreements,
swaptions, caps and floors to achieve the desired
interest rate maturities and asset/liability structures.
The following table shows value-at-risk figures for
DaimlerChrysler’s 2001 and 2000 portfolio of interest-
rate sensitive financial instruments.
In 2001, the average and period-end values-at-risk
of DaimlerChrysler’s portfolio of interest rate sensitive
financial instruments increased significantly, primarily
due to higher volatilities and an increased mismatch
funding of the Group’s leasing and sales financing
business.
Equity price risk management. DaimlerChrysler also
holds investments in equity securities. These securities
subject DaimlerChrysler to risks due to changes in
quoted market prices. DaimlerChrysler uses derivative
financial instruments including futures and options to
manage the risks arising from changes in equity prices.
The following table shows value-at-risk figures
for DaimlerChrysler’s 2001 and 2000 portfolio of equity
securities.
In 2001, DaimlerChrysler changed its asset
allocation policy and reduced the portfolio of equity
securities. Consequently, the average and period-
end values-at-risk of the equity portfolio decreased
significantly.
Ratings. During 2001, DaimlerChrysler’s long-term
corporate rating was lowered from A to BBB+ by the
Standard & Poor’s (S&P) rating agency and from A2
to A3 by Moody’s Investors Service (Moody’s). At the
same time, our short-term rating was reduced from
A-1 to A-2 (by S&P) and from P-1 to P-2 (by Moody’s).
A further downgrade would result in rising
capital costs.
Value-at-Risk
In millions of € 12.31.200012.31.2001
Interest-rate-sensitive
financial instruments 334 272 126 128
2000
Average
for
Average
for
Value-at-Risk
In millions of € 2001 12.31.200012.31.2001
Equity securities and
related derivatives 32287 95
2000
2001
Average
for
Average
for