Goldman Sachs 2003 Annual Report Download - page 62

Download and view the complete annual report

Please find page 62 of the 2003 Goldman Sachs annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

Management’s Discussion and Analysis
60 GOLDMAN SACHS 2003 ANNUAL REPORT
Accordingly, the market risk of derivative positions is
managed with all of our other nonderivative risk.
Derivative contracts are reported on a net-by-counter-
party basis in our consolidated statements of financial
condition when management believes a legal right of
setoff exists under an enforceable netting agreement. For
an OTC derivative, our credit exposure is directly with
our counterparty and continues until the maturity or ter-
mination of such contract.
OVER-THE-COUNTER DERIVATIVE CREDIT EXPOSURE
($ IN MILLIONS)
EXPOSURE PERCENTAGE OF
COLLATERAL NET OF EXPOSURE NET
CREDIT RATING EQUIVALENT EXPOSURE HELD(2) COLLATERAL OF COLLATERAL
AAA/Aaa $ 2,991 $ 144 $ 2,847 8%
AA/Aa2 8,980 803 8,177 23
A/A2 17,048 2,126 14,922 43
BBB/Baa2 6,421 1,033 5,388 15
BB/Ba2 or lower 4,251 822 3,429 10
Unrated(1) 860 479 381 1
Total $40,551 $5,407 $35,144 100%
The following tables set forth our OTC derivative credit exposure, net of collateral, by remaining contractual maturity:
EXPOSURE NET OF COLLATERAL
(IN MILLIONS)
0–66–12 1–55–10 10 YEARS
CREDIT RATING EQUIVALENT MONTHS MONTHS YEARS YEARS OR GREATER TOTAL(3)
AAA/Aaa $ 315 $ 113 $1,229 $ 560 $ 630 $ 2,847
AA/Aa2 2,198 412 2,566 1,605 1,396 8,177
A/A2 3,105 1,032 2,585 1,167 7,033 14,922
BBB/Baa2 1,874 539 1,556 1,128 291 5,388
BB/Ba2 or lower 1,022 255 1,291 624 237 3,429
Unrated(1) 142 70 109 58 2 381
Total $8,656 $2,421 $9,336 $5,142 $9,589 $35,144
0–6 6–12 1–55–10 10 YEARS
CONTRACT TYPE MONTHS MONTHS YEARS YEARS OR GREATER TOTAL(3)
Interest rates $1,323 $ 80 $3,250 $2,494 $8,411 $15,558
Currencies 4,948 1,148 3,934 1,829 898 12,757
Commodities 1,456 586 1,522 476 148 4,188
Equities 929 607 630 343 132 2,641
Total $8,656 $2,421 $9,336 $5,142 $9,589 $35,144
(1) In lieu of making an individual assessment of the credit of unrated counterparties, we make a determination that the collateral held in respect of
such obligations is sufficient to cover a significant portion of our exposure. In making this determination, we take into account various factors,
including legal uncertainties and market volatility.
(2) Collateral is usually received under agreements entitling Goldman Sachs to require additional collateral upon specified increases in exposure or
the occurrence of adverse credit events.
(3) Where we have obtained collateral from a counterparty under a master trading agreement that covers multiple products and transactions, we have
allocated the collateral ratably based on exposure before giving effect to such collateral.
The following table sets forth the distribution, by credit rating, of substantially all of our exposure with respect to
OTC derivatives as of November 2003, after taking into consideration the effect of netting agreements. The categories
shown reflect our internally determined public rating agency equivalents.