Citibank 2013 Annual Report Download - page 301

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Valuation Techniques and Inputs for Level 3 Fair Value
Measurements
The Company’s Level 3 inventory consists of both cash securities and
derivatives of varying complexities. The valuation methodologies applied
to measure the fair value of these positions include discounted cash
flow analyses, internal models and comparative analysis. A position is
classified within Level 3 of the fair value hierarchy when at least one input
is unobservable and is considered significant to its valuation. The specific
reason an input is deemed unobservable varies. For example, at least one
significant input to the pricing model is not observable in the market, at least
one significant input has been adjusted to make it more representative of the
position being valued, or the price quote available does not reflect sufficient
trading activities.
The following tables present the valuation techniques covering the
majority of Level 3 inventory and the most significant unobservable inputs
used in Level 3 fair value measurements as of December 31, 2013 and
December 31, 2012. Differences between this table and amounts presented
in the Level 3 Fair Value Rollforward table represent individually immaterial
items that have been measured using a variety of valuation techniques other
than those listed.
Valuation Techniques and Inputs for Level 3 Fair Value Measurements
As of December 31, 2013
Fair Value
(in millions)
(1)
Methodology Input Low (2)(3) High (2)(3)
Weighted
Average (4)
Assets
Federal funds sold and securities
borrowed or purchased under
agreements to resell $3,299 Model-based Interest rate 1.33% 2.19% 2.04%
Mortgage-backed securities $2,869 Price-based Price $ 0.10 $ 117.78 $ 77.60
1,241 Yield analysis Yield 0.03% 21.80% 8.66%
State and municipal, foreign
government, corporate and
other debt securities $5,361 Price-based Price $ — $ 126.49 $ 87.47
2,014 Cash flow Credit spread 11 bps 375 bps 213 bps
Equity securities (5) $ 947 Price-based Price (5) $ 0.31 $ 93.66 $ 86.90
827 Cash flow Yield 4.00% 5.00% 4.50%
WAL 0.01 years 3.55 years 1.38 years
Asset-backed securities $4,539 Price-based Price $ — $ 135.83 $ 70.89
1,300 Model-based Credit spread 25 bps 378 bps 302 bps
Non-marketable equity $2,324 Price-based Fund NAV $ 612 $336,559,340 $124,080,454
1,470 Comparables analysis EBITDA multiples 4.20x 16.90x 9.78x
533 Cash flow Discount to price —% 75.00% 3.47%
Price-to-book ratio 0.90x 1.05x 1.02x
PE ratio 9.10x 9.10x 9.10x
Derivatives—Gross (6)
Interest rate contracts (gross) $5,721 Model-based Interest rate (IR)
lognormal volatility 10.60% 87.20% 21.16%
Foreign exchange contracts (gross) $1,727 Model-based Foreign exchange (FX) volatility 1.00% 28.00% 13.45%
189 Cash flow Interest rate 0.11% 13.88% 6.02%
IR-FX correlation 40.00% 60.00% 50.00%
IR-IR correlation 40.00% 68.79% 40.52%
Credit spread 25 bps 419 bps 162 bps
Equity contracts (gross) (7) $3,189 Model-based Equity volatility 10.02% 73.48% 29.87%
563 Price-based Equity forward 79.10% 141.00% 100.24%
Equity-equity correlation (81.30)% 99.40% 48.45%
Equity-FX correlation (70.00)% 55.00% 0.60%
Price $ — $ 118.75 $ 88.10