Goldman Sachs 2013 Annual Report Download - page 130

Notes to Consolidated Financial Statements
Level 3 Cash Instruments
Level 3 Assets
as of December 2012
(in millions)
Valuation Techniques and
Significant Unobservable Inputs
Range of Significant Unobservable
Inputs (Weighted Average)
as of December 2012
Loans and securities backed by commercial real
estate
‰Collateralized by a single commercial real estate
property or a portfolio of properties
‰May include tranches of varying levels of
subordination
$3,389 Discounted cash flows:
‰Yield 4.0% to 43.3% (9.8%)
‰Recovery rate 37.0% to 96.2% (81.7%)
‰Duration (years) 0.1 to 7.0 (2.6)
‰Basis (13) points to 18 points (2 points)
Loans and securities backed by residential real estate
‰Collateralized by portfolios of residential real
estate
‰May include tranches of varying levels of
subordination
$1,619 Discounted cash flows:
‰Yield 3.1% to 17.0% (9.7%)
‰Cumulative loss rate 0.0% to 61.6% (31.6%)
‰Duration (years) 1.3 to 5.9 (3.7)
Bank loans and bridge loans $11,235 Discounted cash flows:
‰Yield 0.3% to 34.5% (8.3%)
‰Recovery rate 16.5% to 85.0% (56.0%)
‰Duration (years) 0.2 to 4.4 (1.9)
Non-U.S. government and agency obligations
Corporate debt securities
State and municipal obligations
Other debt obligations
$4,651 Discounted cash flows:
‰Yield 0.6% to 33.7% (8.6%)
‰Recovery rate 0.0% to 70.0% (53.4%)
‰Duration (years) 0.5 to 15.5 (4.0)
Equities and convertible debentures (including
private equity investments and investments in real
estate entities)
$14,855 1Comparable multiples:
‰Multiples 0.7x to 21.0x (7.2x)
Discounted cash flows:
‰Discount rate/yield 10.0% to 25.0% (14.3%)
‰Long-term growth rate/
compound annual growth rate
0.7% to 25.0% (9.3%)
‰Capitalization rate 3.9% to 11.4% (7.3%)
1. The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparables and discounted cash flows may be
used together to determine fair value. Therefore, the level 3 balance encompasses both of these techniques.
Increases in yield, discount rate, capitalization rate,
duration or cumulative loss rate used in the valuation of the
firm’s level 3 cash instruments would result in a lower fair
value measurement, while increases in recovery rate, basis,
multiples, long-term growth rate or compound annual
growth rate would result in a higher fair value
measurement. Due to the distinctive nature of each of the
firm’s level 3 cash instruments, the interrelationship of
inputs is not necessarily uniform within each product type.
128 Goldman Sachs 2013 Annual Report