34.5. Methods for monitoring hedge effectiveness

In the Volkswagen Group, hedge effectiveness is assessed prospectively using the critical terms match method and using statistical methods in the form of a regression analysis. Retrospective analysis of effectiveness uses effectiveness tests in the form of the dollar offset method or a regression analysis.

Under the dollar offset method, the changes in value of the hedged item expressed in monetary units are compared with the changes in value of the hedging instrument expressed in monetary units.

Where regression analysis is used, the change in value of the hedged item is presented as an independent variable, and that of the hedging instrument as a dependent variable. Hedge relationships are classified as effective if they have sufficient coefficients of determination and slope factors.

  (XLS:) Download

NOTIONAL AMOUNT OF DERIVATIVES

 

 

REMAINING TERM

 

TOTAL NOTIONAL AMOUNT

 

TOTAL NOTIONAL AMOUNT

€ million

 

under one year

 

within one to five years

 

over five years

 

Dec. 31, 2014

 

Dec. 31, 2013

 

 

 

 

 

 

 

 

 

 

 

Notional amount of hedging instruments used in cash flow hedges:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

1,228

 

3,926

 

 

5,154

 

6,127

Currency forwards

 

40,822

 

43,421

 

 

84,243

 

65,366

Currency options

 

7,222

 

9,024

 

 

16,246

 

10,365

Currency swaps

 

4,461

 

474

 

4

 

4,938

 

4,883

Cross-currency swaps

 

315

 

1,300

 

 

1,615

 

1,293

Commodity futures contracts

 

360

 

498

 

 

858

 

749

Notional amount of other derivatives:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

18,991

 

42,981

 

14,216

 

76,188

 

65,568

Interest rate option contracts

 

 

 

 

 

61

Currency forwards

 

5,437

 

1,336

 

1

 

6,774

 

7,077

Other currency options

 

45

 

91

 

 

137

 

42

Currency swaps

 

8,475

 

259

 

 

8,734

 

5,226

Cross-currency swaps

 

4,034

 

4,890

 

11

 

8,935

 

10,022

Commodity futures contracts

 

895

 

1,099

 

 

1,994

 

1,384

In addition to the derivatives used for hedging foreign currency, interest rate and price risk, the Group held options and other derivatives on equity instruments at the reporting date with a notional amount of €1.5 billion (previous year: €1.5 billion) whose remaining maturity is under one year.

Existing cash flow hedges in the notional amount of €18 million (previous year: €214 million) were discontinued because of a reduction in the projections. €0 million (previous year: €1 million) was transferred from the cash flow hedge reserve to the financial result, decreasing earnings.

Items hedged under cash flow hedges are expected to be realized in accordance with the maturity buckets of the hedges reported in the table.

The fair values of the derivatives are estimated using market data at the balance sheet date as well as by appropriate valuation techniques. The following term structures were used for the calculation:

  (XLS:) Download

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in %

 

EUR

 

AUD

 

CAD

 

CHF

 

CNY

 

GBP

 

KRW

 

SEK

 

USD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate for six months

 

0.1286

 

2.6375

 

1.2794

 

0.0323

 

4.8462

 

0.5827

 

2.1152

 

0.2888

 

0.2718

Interest rate for one year

 

0.1165

 

2.5215

 

1.3166

 

−0.0090

 

4.4683

 

0.6412

 

2.0550

 

0.2574

 

0.4307

Interest rate for five years

 

0.3587

 

2.6700

 

1.7710

 

0.0630

 

4.1750

 

1.4417

 

2.2050

 

0.6445

 

1.7550

Interest rate for ten years

 

0.8125

 

3.1450

 

2.2610

 

0.5175

 

3.8400

 

1.8473

 

2.4400

 

1.2625

 

2.2560