34. Derivative Financial Instruments
Foreign exchange and other derivative financial instruments entered into by the Group are generally traded in an over-the-counter market with professional market counterparties. Derivatives have potentially favourable (assets) or unfavourable (liabilities) conditions as a result of fluctuations in market interest rates, foreign exchange rates or other variables relative to their terms. Fair value of derivative financial assets and liabilities can fluctuate significantly from time to time.
Fair value of forward contracts is calculated as present value of amounts receivable less present value of amounts payable. The inputs in the discounted cash flows model used are forward exchange rate quotations and quoted implied depo rates. Such instruments are classified as level 2 of fair value hierarchy. Refer to Note 35.
Fair value of option contracts is calculated using the Black-Scholes model. Adjustments for credit risk are made where appropriate. The main inputs of this model are current market price and implied volatility. Where these inputs could be observed on the open market, the carrying amounts are disclosed as level 2 of fair value hierarchy. Otherwise, the amounts are disclosed as level 3. Refer to Note 35.
The table reflects gross positions before the netting of any counterparty positions (and payments) and covers the contracts with settlement dates after the respective reporting date. The contracts are short term in nature.
| As at 31 December 2012 (In billions of Russian Roubles) | Principal or agreed amount at fair value of assets receivable | Principal or agreed amount at fair value of assets payable | Assets positive fair value | Liabilities negative fair value |
|---|---|---|---|---|
| Foreign currency: | ||||
| Market options | 0.3 | (0.3) | — | — |
| Market swaps | (6.7) | 6.7 | (0.1) | 0.1 |
| OTC options | 246.1 | (245.5) | 9.7 | (9.1) |
| OTC swaps | 1,018.6 | (1,000.9) | 30.7 | (13.0) |
| Forwards | 203.2 | (203.7) | 1.8 | (2.3) |
| Futures | 13.1 | (13.1) | 0.4 | (0.4) |
| Total | 1,474.6 | (1,456.8) | 42.5 | (24.7) |
| Interest rate: | ||||
| Market swaps | 2.1 | (1.9) | 0.2 | — |
| OTC options | 0.6 | (0.6) | — | — |
| OTC swaps | 406.6 | (403.4) | 16.9 | (13.7) |
| Forwards | 0.3 | (0.3) | — | — |
| Futures | 14.4 | (14.4) | — | — |
| Total | 424.0 | (420.6) | 17.1 | (13.7) |
| Commodities including precious metals: | ||||
| OTC options | 2.5 | (2.5) | 2.3 | (2.3) |
| OTC swaps | 21.3 | (12.8) | 8.7 | (0.2) |
| Forwards | 3.2 | (3.2) | — | — |
| Futures | 2.5 | (2.5) | — | — |
| Total | 29.5 | (21.0) | 11.0 | (2.5) |
| Equities: | ||||
| Market options | 0.6 | (0.6) | 0.1 | (0.1) |
| OTC options | 9.6 | (6.4) | 3.5 | (0.3) |
| Forwards | 2.5 | (2.4) | 0.2 | (0.1) |
| Futures | 7.8 | (7.8) | — | — |
| Total | 20.5 | (17.2) | 3.8 | (0.5) |
| Debt securities: | ||||
| Forwards | 0.2 | (0.2) | — | — |
| Total | 0.2 | (0.2) | — | — |
| Other: | ||||
| OTC swaps | — | (0.3) | — | (0.3) |
| Total | — | (0.3) | — | (0.3) |
| Total | 1,948.8 | (1,916.1) | 74.4 | (41.7) |
| As at 31 December 2012 (In billions of Russian Roubles) | Principal or agreed amount at fair value of assets receivable | Principal or agreed amount at fair value of assets payable | Assets positive fair value | Liabilities negative fair value |
|---|---|---|---|---|
| Foreign currency: | ||||
| Market options | 27.7 | (27.2) | 0.5 | (0.7) |
| OTC swaps | 394.8 | (397.7) | 4.9 | (7.8) |
| Forwards | 218.8 | (207.5) | 14.9 | (3.6) |
| Futures | 33.0 | (33.0) | 2.3 | (0.4) |
| Total | 674.3 | (665.4) | 22.6 | (12.5) |
| Interest rate: | ||||
| OTC swaps | 272.3 | (269.6) | 14.5 | (11.8) |
| Futures | 71.6 | (71.6) | — | — |
| Total | 343.9 | (341.2) | 14.5 | (11.8) |
| Commodities including precious metals | ||||
| Market options | 0.8 | (1.0) | — | (0.2) |
| Forwards | 35.3 | (28.4) | 8.3 | (1.4) |
| Futures | 0.6 | (0.6) | — | — |
| Total | 36.7 | (30.0) | 8.3 | (1.6) |
| Equities: | ||||
| OTC options | 16.6 | (18.5) | 5.5 | (0.2) |
| Forwards | 4.0 | (3.8) | 0.2 | — |
| Futures | 12.9 | (12.9) | — | — |
| Total | 33.5 | (35.2) | 5.7 | (0.2) |
| Debt securities: | ||||
| OTC options | (5.3) | (4.7) | — | (0.6) |
| Futures | 0.1 | (0.1) | — | — |
| Total | (5.2) | (4.8) | — | (0.6) |
| Total | 1,083.2 | (1,076.6) | 51.1 | (26.7) |
During the year the Group has incurred a net gain on foreign currency derivatives in the amount of 8.4 billion RUB (2011: a net gain of 2.6 billion RUB) and earned net gain on precious metals derivatives in the amount of 6.0 billion RUB (2011: a net gain of 6.5 billion RUB), which is recorded in the Group’s consolidated income statement within net gains arising from trading in foreign currencies, operations with foreign currency derivatives and foreign exchange translation, and net gains arising from operations with precious metals and precious metals derivatives correspondingly.