BBK annual report eng 21.5.5

25 DerivativesIn the ordinary course of business the Group enters into various types of transactions that involve derivative financial instruments. A derivative financialinstrument is a financial contract between two parties where payments are dependent upon movements in price in one or more underlying financialinstrument, reference rate or index. Derivative instruments include forwards, futures, swaps and options.The table below shows the positive and negative fair values of derivative financial instruments together with the notional amounts analysed by theterm to maturity. The notional amount is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes inthe value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at year end and are neither indicative ofthe market risk nor credit risk.31 December 2004Notional amounts by termPositive Negative Notional to maturityfair value fair value amount within 3 3 – 12 1 – 5value value Total months months yearsBD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ’000Derivatives held for trading:Interest rate swaps 70 75 25,803 - 25,803 -Forward foreign exchange contracts 754 645 44,464 13,371 31,093 -Options 24 17 3,800 3,800 - -Derivatives held as fair value hedges:Interest rate swaps 171 179 17,154 - 8,426 8,728Forward foreign exchange contracts 101 110 66,183 65,006 1,177 -Derivatives held as cash flow hedges:Interest rate swaps 14 79 71,819 - 28,275 43,5441,134 1,105 229,223 82,177 94,774 52,27231 December 2003Notional amounts by termPositive Negative Notional to maturityfair value fair value amount within 3 3 – 12 1 – 5value value Total months months yearsBD ’000 BD ’000 BD ’000 BD ’000 BD ’000 BD ’000Derivatives held for trading:Interest rate swaps 187 199 43,963 4,126 15,080 24,757Forward foreign exchange contracts 409 292 54,927 26,118 28,809 -Options 171 146 15,104 13,973 1,131 -Interest rate futures 37 10 18,550 - 18,550 -Derivatives held as fair value hedges:Interest rate swaps 226 470 8,426 - - 8,426Forward foreign exchange contracts 184 152 110,602 110,602 - -Derivatives held as cash flow hedges:Interest rate swaps - 2 37,700 37,700 - -1,214 1,271 289,272 192,519 63,570 33,183Annual Report 2004 50 | 51