Freddie Mac 2014 Annual Report Download - page 145

140 Freddie Mac
Table 61 — PMVS and Duration Gap Results
PMVS-YC PMVS-L
25 bps 50 bps 100 bps
(in millions)
Assuming shifts of the LIBOR yield curve:
December 31, 2014 $ — $ 102 $ 396
December 31, 2013 $ — $ 176 $ 368
Year Ended December 31,
2014 2013
Duration
Gap PMVS-YC 25 bps PMVS-L 50 bps Duration Gap PMVS-YC 25 bps PMVS-L 50 bps
(in months) (dollars in millions) (in months) (dollars in millions)
Average (0.1) $ 14 $ 69 0.2 $ 21 $ 235
Minimum (2.4) $ — $ — (1.2) $ — $ —
Maximum 0.7 $ 65 $ 509 2.0 $ 78 $ 673
Standard deviation 0.4 $ 14 $ 79 0.5 $ 16 $ 121
Derivatives have historically enabled us to reduce our interest-rate risk exposure, which could have been higher without
the use of derivatives. The table below shows that the PMVS-L risk levels for the periods presented would have been higher if
we had not used derivatives. The derivative impact on our PMVS-L (50 basis points) was $(3.1) billion at December 31, 2014,
an increase of $1.1 billion from December 31, 2013.
Table 62 — Derivative Impact on PMVS-L (50 bps)
Before
Derivatives After Derivatives Effect of Derivatives
(in millions)
At:
December 31, 2014 $ 3,226 $ 102 $ (3,124)
December 31, 2013 $ 2,166 $ 176 $ (1,990)
Duration Gap Results
We actively measure and manage our duration gap exposure on a daily basis. In addition to duration gap management, we
also measure and manage the price sensitivity of our portfolio to a number of different specific interest rate changes along the
yield curve. The price sensitivity of an instrument to specific changes in interest rates is known as the instrument’s key rate
duration risk. By managing our duration exposure both in aggregate through duration gap and to specific changes in interest
rates through key rate duration, we expect to limit our fair value exposure to interest rate changes for a wide range of interest
rate yield curve scenarios. However, hedging our overall duration gap exposure could result in increased volatility in our
financial results, as our derivatives and several types of our financial assets are measured at fair value, while our financial
liabilities are generally not measured at fair value. Our average duration gap, rounded to the nearest month, for the months of
December 2014 and 2013 was zero months in both periods. Our average duration gap, rounded to the nearest month, during the
years ended December 31, 2014 and 2013 was zero months in both periods.
The disclosure in our Monthly Volume Summary reports, which are available on our web site at www.freddiemac.com
and in current reports on Form 8-K we file with the SEC, reflects the average of the daily PMVS-L, PMVS-YC and duration
gap estimates for a given reporting period (a month, quarter or year).
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