Annual Report - Ahli United Bank

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Annual Report - Ahli United Bank

28 DERIVATIVES (continued)Derivatives include financial options, futures and forwards, interest rate swaps and currency swaps, which create rights and obligationsthat have the effect of transferring between the parties of the instrument one or more of the financial risks inherent in an underlyingprimary financial instrument. On inception, a derivative financial instrument gives one party a contractual right to exchange financialassets or financial liabilities with another party under conditions that are potentially favourable, or a contractual obligation toexchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable. However, theygenerally do not result in a transfer of the underlying primary financial instrument on inception of the contract, nor does such atransfer necessarily take place on maturity of the contract. Some instruments embody both a right and an obligation to make anexchange. Because the term of the exchange are determined on inception of the derivative instruments, as prices in financial marketschange those terms may become either favourable or unfavourable.The table below shows the net fair values of derivative financial instruments together with the notional amounts. The notional amountis the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivativesare measured. The notional amounts indicate the volume of transactions outstanding at year-end and are neither indicative of themarket risk nor credit risk.2009 2008NotionalamountDerivativeassetsDerivativeliabilitiesNotionalamountDerivativeassetsDerivativeliabilitiesUS$ ’000 US$ ’000 US$ ’000 US$ ’000 US$ ’000 US$ ’000Derivatives held for trading:Interest rate swaps 1,634,354 44,967 44,957 2,648,817 71,114 68,554Forward foreign exchange contracts 5,070,261 106,652 99,003 3,735,890 48,746 50,883Forward rate agreements 1,250,000 3,922 254 - - -Options 226,721 52 170 3,150,479 5,265 4,095Interest rate futures 1,500,000 216 216 - - -Credit derivatives 5,000 55 2,524 35,000 93 -Derivatives held as fair value hedges:Interest rate swaps 2,186,812 25,346 61,154 1,444,941 11,516 143,933Currency swaps 165,871 2,379 3,417 - - -Options 142,014 5,973 - 31,805 2,403 -Derivatives held as cash flow hedges:Interest rate swaps 654,083 1,767 31,592 767,689 3,961 89,61312,835,116 191,329 243,287 11,814,621 143,098 357,078AUB Annual Report 200985

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