Freddie Mac 2014 Annual Report Download - page 194

189 Freddie Mac
Table 9.2 — Gains and Losses on Derivatives
Derivatives not designated as hedging
instruments under the accounting
guidance for derivatives and hedging
Derivative Gains (Losses)
Year Ended December 31,
2014 2013 2012
(in millions)
Interest-rate swaps:
Receive-fixed
Foreign-currency denominated $ (1) $ (21) $ (33)
U.S. dollar denominated 4,074 (10,400) 2,686
Total receive-fixed swaps 4,073 (10,421) 2,653
Pay-fixed (11,366) 19,021 (2,865)
Basis (floating to floating) (1) (2) 8
Total interest-rate swaps (7,294) 8,598 (204)
Option based:
Call swaptions
Purchased 2,355 (2,547) 1,365
Written (168) 546 (38)
Put swaptions
Purchased (1,006) (8) (273)
Written 8 — 6
Other option-based derivatives(1) 248 (413) 190
Total option-based 1,437 (2,422) 1,250
Futures (54) 21 12
Foreign-currency swaps (7) 30 (8)
Commitments 239 (131) 298
Credit derivatives 8 (3) —
Swap guarantee derivatives 8 9 7
Other (3) (3) (1)
Subtotal (5,666) 6,099 1,354
Accrual of periodic settlements:
Receive-fixed interest-rate swaps 3,033 3,764 3,511
Pay-fixed interest-rate swaps (5,660) (7,233) (7,318)
Foreign-currency swaps — — 4
Other 2 2 1
Total accrual of periodic settlements (2,625) (3,467) (3,802)
Total $ (8,291) $ 2,632 $ (2,448)
(1) Primarily includes purchased interest-rate caps and floors and options on Treasury futures.
Hedge Designation of Derivatives
At December 31, 2014 and 2013, we did not have any derivatives in hedge accounting relationships; however, there are
deferred net losses recorded in AOCI related to closed cash flow hedges. Net deferred gains and losses on closed cash flow
hedges (i.e., where the derivative is either terminated or redesignated) are included in AOCI until the related forecasted
transaction affects earnings or is determined to be probable of not occurring. Amounts reclassified from AOCI linked to interest
payments on other debt are recorded in other debt interest expense and amounts not linked to interest payments on other debt
are recorded in expense related to derivatives. In the years ended December 31, 2014 and 2013, we reclassified from AOCI into
earnings, losses of $303 million and $460 million, respectively, related to closed cash flow hedges. See “NOTE 11:
STOCKHOLDERS’ EQUITY — Accumulated Other Comprehensive Income — Future Reclassifications from AOCI to Net
Income Related to Closed Cash Flow Hedges” for information about future reclassifications of deferred net losses related to
closed cash flow hedges to net income.
NOTE 10: COLLATERAL AND OFFSETTING OF ASSETS AND LIABILITIES
Derivative Portfolio
Derivative Counterparties
Our use of cleared derivatives, exchange-traded derivatives, and OTC derivatives exposes us to institutional credit risk.
The requirement that we post initial and variation margin in connection with cleared and exchange-traded derivatives, such as
cleared interest-rate swaps and futures contracts, exposes us to institutional credit risk in the event that our clearing members or
the financial clearinghouses fail to meet their obligations. The use of cleared and exchange-traded derivatives decreases our
credit risk exposure to individual counterparties because a central counterparty is substituted for individual counterparties. OTC
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