Bank of Montreal 2014 Annual Report Download - page 137

Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notional Amounts
The notional amounts of our derivatives represent the amount to which a rate or price is applied in order to calculate the amount of cash that must be
exchanged under the contract. Notional amounts do not represent assets or liabilities and therefore are not recorded in our Consolidated Balance
Sheet.
(Canadian $ in millions) 2014 2013
Hedging Hedging
Trading
Cash
flow
Fair
value Total Trading
Cash
flow
Fair
value Total
Interest Rate Contracts
Over-the-counter
Swaps 2,580,940 45,753 48,984 2,675,677 2,139,706 41,138 43,942 2,224,786
Forward rate agreements 361,484 – – 361,484 399,751 – – 399,751
Purchased options 19,267 – – 19,267 18,283 – – 18,283
Written options 22,955 – – 22,955 23,020 – – 23,020
2,984,646 45,753 48,984 3,079,383 2,580,760 41,138 43,942 2,665,840
Exchange-traded
Futures 125,272 – – 125,272 111,913 – – 111,913
Purchased options 21,680 – – 21,680 16,534 – – 16,534
Written options 21,342 – – 21,342 15,429 – – 15,429
168,294 – – 168,294 143,876 – – 143,876
Total interest rate contracts 3,152,940 45,753 48,984 3,247,677 2,724,636 41,138 43,942 2,809,716
Foreign Exchange Contracts
Over-the-counter
Cross-currency swaps 51,374 242 – 51,616 44,607 227 – 44,834
Cross-currency interest rate swaps 279,119 – – 279,119 255,337 – – 255,337
Forward foreign exchange contracts 283,196 16,284 – 299,480 249,412 14,195 – 263,607
Purchased options 31,148 – – 31,148 10,923 – – 10,923
Written options 36,344 – – 36,344 13,530 – – 13,530
681,181 16,526 – 697,707 573,809 14,422 – 588,231
Exchange-traded
Futures 813 – – 813 621 – – 621
Purchased options 343 – – 343 2,608 – – 2,608
Written options 319 – – 319 616 – – 616
1,475 – – 1,475 3,845 – – 3,845
Total foreign exchange
contracts 682,656 16,526 – 699,182 577,654 14,422 – 592,076
Commodity Contracts
Over-the-counter
Swaps 13,559 – – 13,559 15,122 – – 15,122
Purchased options 8,526 – – 8,526 8,081 – – 8,081
Written options 4,166 – – 4,166 4,285 – – 4,285
26,251 – – 26,251 27,488 – – 27,488
Exchange-traded
Futures 22,586 – – 22,586 24,037 – – 24,037
Purchased options 6,733 – – 6,733 8,044 – – 8,044
Written options 8,499 – – 8,499 9,894 – – 9,894
37,818 – – 37,818 41,975 – – 41,975
Total commodity contracts 64,069 – – 64,069 69,463 – – 69,463
Equity Contracts
Over-the-counter 48,702 – – 48,702 39,360 – – 39,360
Exchange-traded 7,314 – – 7,314 5,851 – – 5,851
Total equity contracts 56,016 – – 56,016 45,211 – – 45,211
Credit Default Swaps
Over-the-counter purchased 8,801 – – 8,801 8,835 – – 8,835
Over-the-counter written 11,983 – – 11,983 13,288 – – 13,288
Total credit default swaps 20,784 – – 20,784 22,123 – – 22,123
Total 3,976,465 62,279 48,984 4,087,728 3,439,087 55,560 43,942 3,538,589
Derivative-Related Market Risk
Derivative instruments are subject to market risk. Market risk arises
from the potential for a negative impact on the balance sheet and/or
income statement resulting from adverse changes in the value of
derivative instruments as a result of changes in certain market variables.
These variables include interest rates, foreign exchange rates, equity
and commodity prices and their implied volatilities, as well as credit
spreads, credit migration and default. We strive to limit market risk by
employing comprehensive governance and management processes for
all market risk-taking activities.
150 BMO Financial Group 197th Annual Report 2014