Valuation
Castellum uses interest rate derivatives in order to manage interest rate risk and achieve the desired interest rate maturity structure. This strategy means that there may be changes in value of the interest rate derivatives portfolio from time to time. In addition, Castellum uses currency derivatives in order to hedge investments in Denmark and Finland as well as to manage currency risk and adjust its interest rate structure linked with borrowing in the international capital market. These also give rise to change in value which are included in the derivative portfolio’s market value.
To calculate the fair value of derivatives, market rates for each term and exchange rates as quoted in the market for the closing date are used. Interest rate swaps are valued by discounting future cash flows to present value, while instruments containing options are valued at current repurchase price. When calculating the fair value of derivatives, adjustments are made for counterparty risk in the form of Credit Value Adjustments (CVA) and Debt Value Adjustments (DVA). CVA shows Castellum’s risk of experiencing credit loss in the event of counterparty default, whereas DVA shows the opposite. The adjustment is calculated at the counterparty level based on expected future credit exposure, risk of default and the recovery rate of exposed credits. As of 31 December 2020, the market value of the interest rate and currency derivatives portfolio amounted to MSEK –1,132 (–715) where fair value is established according to level 2, IFRS 13.
Castellum recognises derivatives as longterm liabilities since the amount will not be settled in cash. A theoretically maturing amount during 2020, however, can be estimated at MSEK –142.
Counterparty risk
In order to limit counterparty risk, Castellum’s derivative contracts are covered by general agreement with derivative contracts (ISDA). This allows Castellum to offset positive and negative market values in the event of default.


31 Dec 2020 

31 Dec 2019 




Asset 

Liability 

Net 

Asset 

Liability 

Net 
Interest rate derivatives 

1 

–741 

–740 

26 

–618 

–592 
Currency derivatives 

158 

–550 

–392 

147 

–270 

–123 
Gross value derivatives 

159 

–1,291 

–1,132 

173 

–888 

–715 
Netting 

–159 

159 

— 

–173 

173 

— 
Net value derivatives 

— 

–1,132 

–1,132 

0 

–715 

–715 
Future cash flow
Future cash flows attributable to interest rate derivatives consist of interest paid minus interest received as presented below. To calculate the variable part of the interest rate derivative, the STIBOR and CIBOR interest rates – as listed at year end – have been used throughout the full term of the derivative.


Future cash flow of interest rate derivatives 


Year 

Interest to pay 

Interest to receive 

Net, MSEK 
2021 

–357 

186 

–171 
2022 

–364 

184 

–180 
2023 

–343 

160 

–183 
2024 

–227 

68 

–159 
2025 

–217 

63 

–154 
2026+ 

–369 

128 

–241 
Total 

–1,877 

789 

–1,088 
Sensitivity analysis
The table below shows the interest rate derivative portfolio’s nominal net amount and market value and the market value of the portfolio with a +/– 1 percentagepoint change in the interest rate. Based on the date of termination, interest rate derivatives that include an option have been reported in the same time segment as prior to the assumed change in interest rate.
End date 

Amount, MSEK 

Acquisition cost, MSEK 

Market value, MSEK 

Average interest rate 

Market value, interest rate +1 pp 

Market value, interest rate –1 pp 

2021 

1,350 

— 

2 

0.0% 

9 

–5 
2022 

1,600 

— 

1 

0.1% 

24 

–23 
2023 

1,166 

— 

–8 

0.2% 

–15 

–1 
2024 

900 

— 

–12 

0.5% 

16 

–41 
2025 

1,300 

— 

–26 

0.6% 

29 

–84 
2026+ 

8,389 



–818 

1.3% 

–353 

–1,325 
Total 

14,705 

— 

–861 

0.8% 

–290 

–1,479 
Currency derivatives with a market value of MSEK –271 (–81) are not included in the table above, since a change in the market interest rate has an insignificant effect on the market value.