Freddie Mac 2010 Annual Report Download - page 236

Derivative Assets and Liabilities at Fair Value
Table 12.1 presents the location and fair value of derivatives reported in our consolidated balance sheets.
Table 12.1 — Derivative Assets and Liabilities at Fair Value
Notional or
Contractual
Amount Assets
(1)
Liabilities
(1)
Notional or
Contractual
Amount Assets
(1)
Liabilities
(1)
Derivatives at Fair Value Derivatives at Fair Value
At December 31, 2010 At December 31, 2009
(in millions)
Total derivative portfolio
Derivatives not designated as hedging instruments under the
accounting standards for derivatives and hedging
(2)
Interest-rate swaps:
Receive-fixed . . . . . . . . . . . . . . . . .................. $ 324,590 $ 6,952 $ (3,267) $ 271,403 $ 3,466 $ (5,455)
Pay-fixed . . . . . . . . . . . . . . . . . . . .................. 394,294 3,012 (24,210) 382,259 2,274 (16,054)
Basis (floating to floating) . . . . . . . .................. 2,375 6 (2) 52,045 1 (61)
Total interest-rate swaps . . . . . . . .................. 721,259 9,970 (27,479) 705,707 5,741 (21,570)
Option-based:
Call swaptions
Purchased . . . . . . . . . . . . . . . . . .................. 114,110 8,391 — 168,017 7,764 —
Written . . . . . . . . . . . . . . . . . . .................. 11,775 — (244) 1,200 — (19)
Put Swaptions
Purchased . . . . . . . . . . . . . . . . . .................. 59,975 1,404 — 91,775 2,592 —
Written . . . . . . . . . . . . . . . . . . .................. 6,000 — (8) — — —
Other option-based derivatives
(3)
..................... 47,234 1,460 (10) 141,396 1,705 (12)
Total option-based . . . . . . . . . . . .................. 239,094 11,255 (262) 402,388 12,061 (31)
Futures . . . . . . . . . . . . . . . . . . . . . . .................. 212,383 3 (170) 80,949 5 (89)
Foreign-currency swaps . . . . . . . . . . . .................. 2,021 172 — 5,669 1,624 —
Commitments
(4)
.................................. 14,292 103 (123) 13,872 81 (70)
Credit derivatives . . . . . . . . . . . . . . . .................. 12,833 12 (5) 14,198 26 (11)
Swap guarantee derivatives . . . . . . . . .................. 3,614 — (36) 3,521 — (34)
Total Derivatives not designated as hedging instruments . . . 1,205,496 21,515 (28,075) 1,226,304 19,538 (21,805)
Netting adjustments
(5)
.............................. (21,372) 26,866 (19,323) 21,216
Total derivative portfolio, net . . . . . .................. $1,205,496 $ 143 $ (1,209) $1,226,304 $ 215 $ (589)
(1) The value of derivatives on our consolidated balance sheets is reported as derivative assets, net and derivative liabilities, net.
(2) See “Use of Derivatives” for additional information about the purpose of entering into derivatives not designated as hedging instruments and our overall
risk management strategies.
(3) Primarily includes purchased interest rate caps and floors.
(4) Commitments include: (a) our commitments to purchase and sell investments in securities; and (b) our commitments to purchase and extinguish or issue
debt securities of our consolidated trusts.
(5) Represents counterparty netting, cash collateral netting, net trade/settle receivable or payable, and net derivative interest receivable or payable. The net
cash collateral posted and net trade/settle receivable were $6.3 billion and $1 million, respectively, at December 31, 2010. The net cash collateral posted
and net trade/settle payable were $2.5 billion and $1 million, respectively, at December 31, 2009. The net interest receivable (payable) of derivative
assets and derivative liabilities was approximately $(0.8) billion and $(0.6) billion at December 31, 2010 and 2009, respectively, which was mainly
related to interest rate swaps that we have entered into.
The carrying value of our derivatives on our consolidated balance sheets is equal to their fair value, including net
derivative interest receivable or payable and net trade/settle receivable or payable and is net of cash collateral held or posted,
where allowable by a master netting agreement. Derivatives in a net asset position are reported as derivative assets, net.
Similarly, derivatives in a net liability position are reported as derivative liabilities, net. Cash collateral we obtained from
counterparties to derivative contracts that has been offset against derivative assets, net at December 31, 2010 and 2009 was
$2.2 billion and $3.1 billion, respectively. Cash collateral we posted to counterparties to derivative contracts that has been
offset against derivative liabilities, net at December 31, 2010 and 2009 was $8.5 billion and $5.6 billion, respectively. We are
subject to collateral posting thresholds based on the credit rating of our long-term senior unsecured debt securities from S&P
or Moody’s. In the event our credit ratings fall below certain specified rating triggers or are withdrawn by S&P or Moody’s,
the counterparties to the derivative instruments are entitled to full overnight collateralization on derivative instruments in net
liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were
in a liability position on December 31, 2010, was $9.3 billion for which we have posted collateral of $8.5 billion in the
normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered on
December 31, 2010, we would be required to post an additional $0.8 billion of collateral to our counterparties.
At December 31, 2010 and 2009, there were no amounts of cash collateral that were not offset against derivative assets,
net or derivative liabilities, net, as applicable. See “NOTE 19: CONCENTRATION OF CREDIT AND OTHER RISKS” for
further information related to our derivative counterparties.
233 Freddie Mac