Hilton Grand Vacations Inc. 10-Q

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risk from changes in interest rates and currency exchange rates. We manage our exposure to these risks by monitoring available financing alternatives and through pricing policies that may take into account currency exchange rates. Our exposure to market risk has not materially changed from what we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt, comprised of the term loans, Revolver and our Timeshare Facility and conduit facilities, of which the Timeshare Facility and conduit facilities, are without recourse to us. The interest rates are primarily based on one-month LIBOR and we are most vulnerable to changes in this rate. The interest rate for our Timeshare Facility is based on one-month term SOFR, for which we are also vulnerable to fluctuations in this rate. We primarily use interest rate swaps as part of our interest rate risk management strategy for our variable-rate debt. Our interest rate swaps have been designated and qualify as cash flow hedges of interest rate risk and recorded as an asset in Other Assets in our unaudited condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021. For further information regarding these swaps, see Note 13: Debt and Non-recourse Debt and Note: 14: Fair Value Measurements . Foreign Currency Exchange Rate Risk Though the majority of our operations are conducted in United States dollar (“U.S. dollar”), we are exposed to earnings and cash flow volatility associated with changes in foreign currency exchange rates. Our principal exposure results from our timeshare financing receivables denominated in Japanese yen and Canadian dollars, the value of which could change materially in reference to our reporting currency, the U.S. dollar.