limit its exposure to increases in interest rates on floating rate debt that has not been swapped, and holds interest rate contracts  to lock in fixed rates on anticipated future debt issuances and as an economic hedge against the values of long duration interest  sensitive physical assets that have not been otherwise matched with fixed rate debt. The result of a 50 basis-point increase in interest rates on the company’s net floating rate financial assets and liabilities would  have resulted in a corresponding decrease in net income before tax of $41 million (2012 – $50 million) on an annualized basis. Changes in the value of fair value through profit or loss interest rate contracts are recorded in net income and changes in  the value of contracts that are elected for hedge accounting together with changes in the value of available-for-sale financial  instruments are recorded in other comprehensive income. The impact of a 10 basis-point parallel increase in the yield curve  on the aforementioned financial instruments is estimated to result in a corresponding increase in net income of $2 million  (2012 – $12 million) and an increase in other comprehensive income of $37 million (2012 – $57 million), before tax for the year  ended December 31, 2013. Changes in currency rates will impact the carrying value of financial instruments denominated in currencies other than the  U.S. dollar. The company holds financial instruments with net unmatched exposures in several currencies, changes in the translated value  of which are recorded in net income. The impact of a 1% increase in the U.S. dollar against these currencies would have  resulted in a $14 million (2012 – $10 million) increase in the value of these positions on a combined basis. The impact on cash  flows from financial instruments would be insignificant. The company holds financial instruments to limit its exposure to the  impact of foreign currencies on its net investments in foreign operations whose functional and reporting currencies are other  than the U.S. dollar. A 1% increase in the U.S. dollar would increase the value of these hedging instruments by $82 million  (2012 – $55 million) as at December 31, 2013, which would be recorded in other comprehensive income and offset by changes  in the U.S. dollar carrying value of the net investment being hedged. Other price risk is the risk of variability in fair value due to movements in equity prices or other market prices such as commodity  prices and credit spreads.  Financial instruments held by the company that are exposed to equity price risk include equity securities and equity derivatives.  A 5% decrease in the market price of equity securities and equity derivatives held by the company, excluding equity  derivatives that hedge compensation arrangements, would have decreased net income by $126 million (2012 – $90 million) and  decreased other comprehensive income by $13 million (2012 – $7 million), prior to taxes. The company’s liability in respect  of equity compensation arrangements is subject to variability based on changes in the company’s underlying common share  price. The company holds equity derivatives to hedge almost all of the variability. A 5% change in the common equity price  of the company in respect of compensation agreements would increase the compensation liability and compensation expense  by $36 million (2012 – $30 million). This increase would be offset by a $37 million (2012 – $30 million) change in value of  the associated equity derivatives of which $36 million (2012 – $29 million) would offset the above mentioned increase in  compensation expense and the remaining $1 million (2012 – $1 million) would be recorded in other comprehensive income. The company sells power and generation capacity under long-term agreements and financial contracts to stabilize future  revenues. Certain of the contracts are considered financial instruments and are recorded at fair value in the financial statements,  with changes in value being recorded in either net income or other comprehensive income as applicable. A 5% increase in  energy prices would have decreased net income for the year ended December 31, 2013 by approximately $49 million  (2012 – decrease of $70 million) and decreased other comprehensive income by $27 million (2012 – $21 million), prior to taxes.  The corresponding increase in the value of the revenue or capacity being contracted, however, is not recorded in net income until  subsequent periods. The company held credit default swap contracts with a total notional amount of $1,000 million (2012 – $865 million) at  December 31, 2013. The company is exposed to changes in the credit spread of the contracts’ underlying reference asset. A  10 basis-point increase in the credit spread of the underlying reference assets would have increased net income by $2 million  (2012 – $3 million) for the year ended December 31, 2013, prior to taxes. Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfill its contractual obligations. The company’s  exposure to credit risk in respect of financial instruments relates primarily to counterparty obligations regarding derivative  contracts, loans receivable and credit investments such as bonds and preferred shares. The company assesses the credit worthiness of each counterparty before entering into contracts and ensures that counterparties  meet minimum credit quality requirements. Management evaluates and monitors counterparty credit risk for derivative financial  instruments and endeavours to minimize counterparty credit risk through diversification, collateral arrangements, and other  credit risk mitigation techniques. The credit risk of derivative financial instruments is generally limited to the positive fair value  of the instruments, which, in general, tends to be a relatively small proportion of the notional value. Substantially all of the  b)  Credit Risk Other Price Risk Currency Exchange Rate Risk 142 BROOKFIELD ASSET MANAGEMENT 