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The Investment Funds hold investments that are reported at fair value as of the reporting date, which include securities owned, securities sold, not yet purchased and derivatives as reported in our consolidated balance sheets.
−Removed: Based on their respective balances as of December 31, 2020, we estimate that in the event of a 10% adverse change in the fair value of these investments, the fair values of securities owned, securities sold, not yet purchased and derivatives would decrease by approximately $824 million, $252 million and $1.3 billion, respectively.
+Added: Based on their respective balances as of December 31, 2021, we estimate that in the event of a 10% adverse change in the fair value of these investments, the fair values of securities owned, securities sold, not yet purchased and derivatives, based on the price impact on notional value, would decrease by approximately $895 million, $534 million and $1.2 billion, respectively.
However, as of December 31, 2021, we estimate that the impact to our share of the net gain (loss) from investment activities reported in our consolidated statements of operations would be less than the change in fair value since we have an investment of approximately 45% in the Investment Funds, and the non-controlling interests in income would correspondingly offset approximately 55% of the change in fair value.
−Removed: As of December 31, 2019, we estimated that in the event of a 10% adverse change in the fair value of these investments, the fair values of securities owned, securities sold, not yet purchased and derivatives would decrease by approximately $921 million, $119 million and $1.8 billion, respectively and as of December 31, 2019, our investment in the Investment Funds was 49%.
−Removed: Holding Company
−Removed: The carrying values of investments subject to equity price risks are based on quoted market prices or management’s estimates of fair value as of the balance sheet dates.
−Removed: Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value.
−Removed: Fluctuations in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions.
−Removed: Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.
−Removed: Based on sensitivity analysis for our equity price risks as of December 31, 2020, the effect of a hypothetical 10% adverse change in market prices would result in loss of approximately $35 million for our Holding Company.
−Removed: As of December 31, 2019, such hypothetical loss was approximately $39 million.
−Removed: The selected hypothetical change does not reflect what could be considered the best- or worst-case scenarios as results could be far worse due to the nature of equity markets.
+Added: As of December 31, 2020, we estimated that in the event of a 10% adverse change in the fair value of these investments, the fair values of securities owned, securities sold, not yet purchased and derivatives, based on the price impact on notional value, would decrease by approximately $824 million, $252 million and $1.3 billion, respectively and as of December 31, 2020, our investment in the Investment Funds was 46%.
Commodity Price Risk
CVR Refining, as a manufacturer of refined petroleum products, and CVR Partners, as a manufacturer of nitrogen fertilizer products, all of which are commodities, have exposure to market pricing for products sold in the future.
−Removed: In order to realize value from our Energy segment’s processing capacity, a positive spread between the cost of raw
−Removed: materials and the value of finished products must be achieved (i.e., gross margin or crack spread).
+Added: In order to realize value from our Energy segment’s processing capacity, a positive spread between the cost of raw materials and the value of finished products must be achieved (i.e., gross margin or crack spread).
The physical commodities that comprise our raw materials and finished goods are typically bought and sold at a spot or index price that can be highly variable.
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In addition, the petroleum business seeks to reduce the variability of commodity price exposure by engaging in hedging strategies and transactions that will serve to protect gross margins as forecasted in the annual operating plan.
−Removed: With regard to its hedging activities, CVR Refining may enter into, or has entered into, derivative instruments which serve to:
+Added: With regard to its hedging activities, CVR
+Added: Refining may enter into, or has entered into, derivative instruments which serve to:
lock in or fix a percentage of the anticipated or planned gross margin in future periods when the derivative market offers commodity spreads that generate positive cash flows;
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Our predominant exposure to interest rate risk is related to our operating subsidiaries.
−Removed: Our operating subsidiaries have variable rate debt with a principal amount outstanding aggregating $533 million as of December 31, 2020, including $350 million for our Automotive segment and $150 million for our Food Packaging segment.
+Added: Our operating subsidiaries have variable rate debt with a principal amount outstanding aggregating $195 million as of December 31, 2021, primarily at our Food Packaging segment.
A 1.0% increase in interest rates would increase interest expense by approximately $2 million on an annualized basis, thus decreasing net income by the same amount.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.