Goldman Sachs 2015 Annual Report Download - page 115

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Credit Spread Sensitivity on Derivatives and
Borrowings. VaR excludes the impact of changes in
counterparty and our own credit spreads on derivatives as
well as changes in our own credit spreads on unsecured
borrowings for which the fair value option was elected. The
estimated sensitivity to a one basis point increase in credit
spreads (counterparty and our own) on derivatives was a
gain of $3 million (including hedges) as of both
December 2015 and December 2014. In addition, the
estimated sensitivity to a one basis point increase in our
own credit spreads on unsecured borrowings for which the
fair value option was elected was a gain of $17 million and
$10 million (including hedges) as of December 2015 and
December 2014, respectively. However, the actual net
impact of a change in our own credit spreads is also affected
by the liquidity, duration and convexity (as the sensitivity is
not linear to changes in yields) of those unsecured
borrowings for which the fair value option was elected, as
well as the relative performance of any hedges undertaken.
Interest Rate Sensitivity. “Loans receivable” as of
December 2015 and December 2014 were $45.41 billion
and $28.94 billion, respectively, substantially all of which
had floating interest rates. As of December 2015 and
December 2014, the estimated sensitivity to a 100 basis
point increase in interest rates on such loans was
$396 million and $254 million, respectively, of additional
interest income over a twelve-month period, which does not
take into account the potential impact of an increase in
costs to fund such loans. See Note 9 to the consolidated
financial statements for further information about loans
receivable.
Other Market Risk Considerations
In addition, as of December 2015 and December 2014, we
had commitments and held loans for which we have
obtained credit loss protection from Sumitomo Mitsui
Financial Group, Inc. See Note 18 to the consolidated
financial statements for further information about such
lending commitments.
Additionally, we make investments accounted for under the
equity method and we also make direct investments in real
estate, both of which are included in “Other assets.” Direct
investments in real estate are accounted for at cost less
accumulated depreciation. See Note 13 to the consolidated
financial statements for information about “Other assets.”
Financial Statement Linkages to Market Risk
Measures
We employ a variety of risk measures, each described in the
respective sections above, to monitor market risk across the
consolidated statements of financial condition and
consolidated statements of earnings. The related gains and
losses on these positions are included in “Market making,”
“Other principal transactions,” “Interest income” and
“Interest expense.”
The table below presents certain categories in our
consolidated statements of financial condition and the
market risk measures used to assess those assets and
liabilities. Certain categories on the consolidated statements
of financial condition are incorporated in more than one
risk measure.
Categories on the Consolidated
Statements of Financial
Condition Included in Market
Risk Measures Market Risk Measures
Securities segregated for
regulatory and other purposes, at
fair value
‰VaR
Collateralized agreements
‰Securities purchased under
agreements to resell, at fair
value
‰Securities borrowed, at fair
value
‰VaR
Receivables
‰Certain secured loans, at fair
value
‰VaR
‰Loans receivable ‰Interest Rate Sensitivity
Financial instruments owned, at
fair value
‰VaR
‰10% Sensitivity Measures
‰Credit Spread Sensitivity —
Derivatives
Collateralized financings
‰Securities sold under
agreements to repurchase, at
fair value
‰Securities loaned, at fair value
‰Other secured financings, at fair
value
‰VaR
Financial instruments sold, but not
yet purchased, at fair value
‰VaR
‰Credit Spread Sensitivity —
Derivatives
Unsecured short-term borrowings
and unsecured long-term
borrowings, at fair value
‰VaR
‰Credit Spread Sensitivity —
Borrowings
Goldman Sachs 2015 Form 10-K 103