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Interest rate risk

Interest rate risk (fair value and cash flow)

Interest rate risk depends on fluctuations in market rates, which can cause changes in the fair value of cash flows of financial assets or liabilities. Interest rate risk mainly concerns long-term bonds issued at a fixed rate, which exposes the Group to the risk of fluctuations in their fair value as interest rates change.

In line with the Group's risk management policies, the parent company and the subsidiaries have entered into various IRS contracts with leading financial institutions over the years in order to hedge interest rate risk on their bond issues and bank borrowings.   

Sensitivity analysis

A one percent parallel shift in the 3-month Euribor curve on the Group's floating rate assets and liabilities would have the following effects:
(amounts in thousands of euro)31.12.201531.12.2014 (*) 
Change-1%+1%-1%+1%
Effect on the income statement(3,650)4,020(5,438)19,529
Effect on equity(4.023)4.248(5,200)7,299

 (*)  Note that for the KOS Group, given that interest rates in 2014 and 2015 reached low levels tending to zero, it was decided only to evaluate the effect of a +1% change in interest rates on the income statement and balance sheet.