Goldman Sachs 2013 Annual Report Download - page 150

Notes to Consolidated Financial Statements
The firm economically hedges its exposure to written credit
derivatives primarily by entering into offsetting purchased
credit derivatives with identical underlyings. Substantially
all of the firm’s purchased credit derivative transactions are
with financial institutions and are subject to stringent
collateral thresholds. In addition, upon the occurrence of a
specified trigger event, the firm may take possession of the
reference obligations underlying a particular written credit
derivative, and consequently may, upon liquidation of the
reference obligations, recover amounts on the underlying
reference obligations in the event of default.
As of December 2013, written and purchased credit
derivatives had total gross notional amounts of
$1.43 trillion and $1.52 trillion, respectively, for total net
notional purchased protection of $81.55 billion. As of
December 2012, written and purchased credit derivatives
had total gross notional amounts of $1.76 trillion and
$1.86 trillion, respectively, for total net notional purchased
protection of $98.33 billion.
The table below presents certain information about credit
derivatives. In the table below:
‰fair values exclude the effects of both netting of receivable
balances with payable balances under enforceable netting
agreements, and netting of cash received or posted under
enforceable credit support agreements, and therefore are
not representative of the firm’s credit exposure;
‰tenor is based on expected duration for mortgage-related
credit derivatives and on remaining contractual maturity
for other credit derivatives; and
‰the credit spread on the underlying, together with the
tenor of the contract, are indicators of
payment/performance risk. The firm is less likely to pay
or otherwise be required to perform where the credit
spread and the tenor are lower.
Maximum Payout/Notional Amount
of Written Credit Derivatives by Tenor
Maximum Payout/Notional
Amount of Purchased
Credit Derivatives Fair Value of Written Credit Derivatives
$ in millions
0-12
Months 1-5 Years 5 Years or Greater Total
Offsetting
Purchased
Credit
Derivatives 1
Other
Purchased
Credit
Derivatives 2Asset Liability
Net
Asset/
(Liability)
As of December 2013
Credit spread on underlying
(basis points)
0 - 250 $286,029 $ 950,126 $ 79,241 $1,315,396 $1,208,334 $183,665 $32,508 $ 4,396 $ 28,112
251 - 500 7,148 42,570 10,086 59,804 44,642 16,884 2,837 1,147 1,690
501 - 1,000 3,968 18,637 1,854 24,459 22,748 2,992 101 1,762 (1,661)
Greater than 1,000 5,600 27,911 1,226 34,737 30,510 6,169 514 12,436 (11,922)
Total $302,745 $1,039,244 $ 92,407 $1,434,396 $1,306,234 $209,710 $35,960 $19,741 $ 16,219
As of December 2012
Credit spread on underlying
(basis points)
0 - 250 $360,289 $ 989,941 $103,481 $1,453,711 $1,343,561 $201,459 $28,817 $ 8,249 $ 20,568
251 - 500 13,876 126,659 35,086 175,621 157,371 19,063 4,284 7,848 (3,564)
501 - 1,000 9,209 52,012 5,619 66,840 60,456 8,799 769 4,499 (3,730)
Greater than 1,000 11,453 49,721 3,622 64,796 57,774 10,812 568 21,970 (21,402)
Total $394,827 $1,218,333 $147,808 $1,760,968 $1,619,162 $240,133 $34,438 $42,566 $ (8,128)
1. Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives that economically hedge written credit derivatives with
identical underlyings.
2. This purchased protection represents the notional amount of all other purchased credit derivatives not included in “Offsetting Purchased Credit Derivatives.”
148 Goldman Sachs 2013 Annual Report