Goldman Sachs 2013 Annual Report Download - page 169

Notes to Consolidated Financial Statements
In addition to the interests in the table above, the firm had
other continuing involvement in the form of derivative
transactions and guarantees with certain nonconsolidated
VIEs. The carrying value of these derivatives and
guarantees was a net asset of $26 million and $45 million as
of December 2013 and December 2012, respectively. The
notional amounts of these derivatives and guarantees are
included in maximum exposure to loss in the
nonconsolidated VIE tables in Note 11.
The tables below do not give effect to the offsetting benefit
of other financial instruments that are held to mitigate risks
inherent in these retained interests. Changes in fair value
based on an adverse variation in assumptions generally
cannot be extrapolated because the relationship of the
change in assumptions to the change in fair value is not
usually linear. In addition, the impact of a change in a
particular assumption in the below tables are calculated
independently of changes in any other assumption. In
practice, simultaneous changes in assumptions might
magnify or counteract the sensitivities disclosed below.
The tables below present the weighted average key
economic assumptions used in measuring the fair value of
retained interests and the sensitivity of this fair value to
immediate adverse changes of 10% and 20% in those
assumptions. In the tables below, the constant prepayment
rate is included only for positions for which it is a key
assumption in the determination of fair value. The discount
rate for retained interests that relate to U.S. government
agency-issued collateralized mortgage obligations does not
include any credit loss. Expected credit loss assumptions are
reflected in the discount rate for the remainder of
retained interests.
As of December 2013
Type of Retained Interests
$ in millions Mortgage-Backed Other 1
Fair value of retained interests $3,641 $ 86
Weighted average life (years) 8.3 1.9
Constant prepayment rate 7.5% N.M.
Impact of 10% adverse change $ (36) N.M.
Impact of 20% adverse change (64) N.M.
Discount rate 3.9% N.M.
Impact of 10% adverse change $ (85) N.M.
Impact of 20% adverse change (164) N.M.
As of December 2012
Type of Retained Interests
$ in millions Mortgage-Backed Other 1
Fair value of retained interests $4,761 $ 51
Weighted average life (years) 8.2 2.0
Constant prepayment rate 10.9% N.M.
Impact of 10% adverse change $ (57) N.M.
Impact of 20% adverse change (110) N.M.
Discount rate 4.6% N.M.
Impact of 10% adverse change $ (96) N.M.
Impact of 20% adverse change (180) N.M.
1. Due to the nature and current fair value of certain of these retained interests,
the weighted average assumptions for constant prepayment and discount
rates and the related sensitivity to adverse changes are not meaningful as of
December 2013 and December 2012. The firm’s maximum exposure to
adverse changes in the value of these interests is the carrying value of
$86 million and $51 million as of December 2013 and
December 2012, respectively.
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