33.5. 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.

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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, 2013

 

Dec. 31, 2012

 

 

 

 

 

 

 

 

 

 

 

Notional amount of hedging instruments used in cash flow hedges:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

2,436

 

3,690

 

1

 

6,127

 

5,967

Currency forwards

 

31,544

 

33,822

 

 

65,366

 

82,293

Currency options

 

3,738

 

6,627

 

 

10,365

 

12,980

Currency swaps

 

4,487

 

396

 

 

4,883

 

912

Cross-currency swaps

 

279

 

1,015

 

 

1,293

 

1,538

Commodity futures contracts

 

280

 

469

 

 

749

 

884

Notional amount of other derivatives:

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

22,249

 

35,509

 

7,810

 

65,568

 

61,642

Interest rate option contracts

 

 

20

 

40

 

61

 

40

Currency forwards

 

6,057

 

1,019

 

1

 

7,077

 

7,394

Other currency options

 

8

 

28

 

6

 

42

 

290

Currency swaps

 

5,004

 

221

 

 

5,226

 

5,800

Cross-currency swaps

 

4,433

 

5,584

 

5

 

10,022

 

8,928

Commodity futures contracts

 

798

 

586

 

 

1,384

 

1,723

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 €214 million (previous year: €76 million) were discontinued because of a reduction in the projections. €1 million was transferred from the cash flow hedge reserve to the other financial result, decreasing earnings (previous year: €3 million, increasing 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:

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in %

 

EUR

 

USD

 

GBP

 

CNY

 

CHF

 

MXN

 

SEK

 

PLN

 

AUD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate for six months

 

0.4014

 

0.2579

 

0.5529

 

5.7046

 

0.1797

 

3.9575

 

0.9177

 

2.6874

 

2.6270

Interest rate for one year

 

0.4282

 

0.3041

 

0.6439

 

5.8818

 

0.2301

 

4.0599

 

0.9909

 

2.7217

 

2.6533

Interest rate for five years

 

1.2580

 

1.7530

 

2.1360

 

5.7850

 

0.7700

 

5.4150

 

2.1700

 

3.7050

 

3.7750

Interest rate for ten years

 

2.1550

 

3.0300

 

2.9860

 

5.8000

 

1.6380

 

6.3300

 

2.8575

 

4.2150

 

4.5900