Barclays 2014 Annual Report Download - page 292

290 I Barclays PLC Annual Report 2014 barclays.com/annualreport
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of financial instruments continued
Significant unobservable inputs
The following table discloses the valuation techniques and significant unobservable inputs for assets and liabilities recognised at fair value and
classified as Level 3 along with the range of values used for those significant unobservable inputs:
Total
assets
£m
Total
liabilities
£m
Valuation
technique(s)
Significant
unobservable
inputs
2014
Range
2013
Range
Unitsa
Min Max Min Max
Derivative financial
instrumentsb
Interest rate 1,239 (1,344) Discounted cash flows Inflation forwards (0.5) 11 (0.1) 4 %
derivatives Option model Inflation volatility 0.4 3 1 2 %
IR – IR correlation (88) 100 (34) 100 %
FX – IR correlation 14 90 14 90 %
Interest rate volatility – 97 8 52 %
Credit derivatives 1,966 (409) Discounted cash flows Credit spread 116 240 138 1,530 bps
Correlation model Credit correlation 36 90 22 81 %
Credit spread 6 5,898 206 934 bps
Comparable pricing Price 64 100 – 100 points
Equity derivatives 1,247 (2,092) Equity volatility 1 97 13 97 %
Equity – equity correlation (55) 99 25 96 %
Equity – FX correlation (80) 55 (91) 55 %
Non-derivative
financial
instruments
Corporate debt 3,061 (13) Discounted cash flows Credit spread 140 900 138 540 bps
Comparable pricing Price – 104 – 120 points
Asset backed
securities
1,631 – Discounted cash flows Conditional prepayment rate – 5 – 54 %
Constant default rate – 9 – 15 %
Loss given default 45 100 – 100 %
Yield 3 11 – 52 %
Credit spread 74 2,688 13 5,305 bps
Comparable pricing Price – 100 – 201 points
Commercial real 1,180 – Discounted cash flows Loss given default – 100 – 100 %
estate loans Yield 4 8 2 26 %
Credit spread 124 675 134 294 bps
Non-asset backed
securities
17,744 – Discounted cash flows Loan spread 39 1,000 – 1,124 bps
Otherc2,320 (182) Discounted cash flows Constant default rate – – 2 10 %
Loss given default – – 33 95 %
Yield 8 9 3 35 %
Comparable pricing Price – 133 – 102 points
Net asset valuedNet asset value
Notes
a The units used to disclose ranges for significant unobservable inputs are percentages, points and basis points. Points are a percentage of par; for example, 100 points equals
100% of par. A basis point equals 1/100th of 1%; for example, 150 basis points equals 1.5%.
b Certain derivative instruments are classified as Level 3 due to a significant unobservable credit spread input into the calculation of the Credit Valuation Adjustment for the
instruments. The range of significant unobservable credit spreads is between 53-825bps.
c Other includes private equity investments, asset-backed loans, US Lehman acquisition assets and investment property.
d A range has not been provided for net asset value as there would be a wide range reflecting the diverse nature of the positions.