Porsche 2008 Annual Report Download - page 221

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4.3.1.3 Investment risk from asset management
The Volkswagen subgroup has invested part of its liquid assets in special securities funds. These
are subject in particular to a stock and bond risk which can arise from fluctuations in market
prices, stock exchange indices and market rates of interest. The risks are counteracted in a first
step by a broad diversification of products, issuers and regional markets. In addition, exchange
rate hedges are used in the form of futures contracts when market conditions are appropriate. If
stock prices as of 31 July 2009 had been 10% higher (lower), equity would have been €54 million
higher (lower).
4.3.1.4 Commodity price risk
Commodity price risk in the automotive division results from price fluctuations and the availability
of non-ferrous metals and precious metals as well as of coal and CO2 certificates. Forward trans-
actions are entered into to limit these risks. Hedge accounting in accordance with IAS 39 is ap-
plied to the hedging of commodity risk associated with aluminum and copper.
Commodity price risk within the meaning of IFRS 7 is presented using sensitivity analyses. These
show the effect on profit and equity of changes in risk variables in the form of commodity prices.
If the commodity prices of the hedged metals had been 10% higher (lower) as of 31 July 2009,
profit would have been €49 million higher (lower). If the commodity prices of the hedging transac-
tions accounted for using hedge accounting had been 10% higher (lower) as of 31 July 2009,
equity would have been €74 million higher (lower).
4.3.2 Market risk in the financial services divisions
Exchange rate risk in the financial services division is mainly attributable to assets that are not
denominated in the functional currency and from refinancing within operating activities. Interest
rate risk relates to refinancing without matching maturities and the varying interest rate elasticity
of individual asset and liability items. The risks are limited by the use of currency and interest rate
hedges.
Regarding the fair value portfolio hedge fixed-rate receivables and liabilities are hedged against
changes in the risk-free base rate. The assets and liabilities included in this hedging strategy are
measured at fair value for the remaining term. The resulting effects in the income statement are
offset by the corresponding gains and losses on the interest rate hedging instruments.
The value at risk is determined using a historical simulation based on the last 250 trading days
and with a retention period of 10 days as well as a confidence level of 99% and the potential
change in financial instruments if interest and exchange rates vary.