JP Morgan Chase 2014 Annual Report Download - page 213

JPMorgan Chase & Co./2014 Annual Report 211
Liquidity impact of downgrade triggers on OTC and
OTC-cleared derivatives
2014 2013
December 31, (in millions) Single-notch downgrade Two-notch downgrade Single-notch downgrade Two-notch downgrade
Amount of additional collateral to be posted upon downgrade(a) $ 1,046 $ 3,331 $ 952 $ 3,244
Amount required to settle contracts with termination triggers upon downgrade(b) 366 1,388 540 876
(a) Includes the additional collateral to be posted for initial margin.
(b) Amounts represent fair value of derivative payables, and do not reflect collateral posted.
Impact of derivatives on the Consolidated statements of income
The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting
designation or purpose.
Fair value hedge gains and losses
The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well
as pretax gains/(losses) recorded on such derivatives and the related hedged items for the years ended December 31, 2014,
2013 and 2012, respectively. The Firm includes gains/(losses) on the hedging derivative and the related hedged item in the
same line item in the Consolidated statements of income.
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2014 (in millions) Derivatives Hedged items
Total income
statement
impact Hedge ineffectiveness(d) Excluded components(e)
Contract type
Interest rate(a) $ 2,106 $ (801) $ 1,305 $ 131 $ 1,174
Foreign exchange(b) 8,279 (8,532) (253) — (253)
Commodity(c) 49 145 194 42 152
Total $ 10,434 $ (9,188) $ 1,246 $ 173 $ 1,073
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2013 (in millions) Derivatives Hedged items
Total income
statement
impact Hedge ineffectiveness(d) Excluded components(e)
Contract type
Interest rate(a) $ (3,469) $ 4,851 $ 1,382 $ (132) $ 1,514
Foreign exchange(b) (1,096) 864 (232) — (232)
Commodity(c) 485 (1,304) (819) 38 (857)
Total $ (4,080) $ 4,411 $ 331 $ (94) $ 425
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2012 (in millions) Derivatives Hedged items
Total income
statement
impact Hedge ineffectiveness(d) Excluded components(e)
Contract type
Interest rate(a) $ (1,238) $ 1,879 $ 641 $ (28) $ 669
Foreign exchange(b) (3,027) 2,925 (102) — (102)
Commodity(c) (2,530) 1,131 (1,399) 107 (1,506)
Total $ (6,795) $ 5,935 $ (860) $ 79 $ (939)
(a) Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS
securities. Gains and losses were recorded in net interest income. The current presentation excludes accrued interest.
(b) Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses
related to the derivatives and the hedged items, due to changes in foreign currency rates, were recorded in principal transactions revenue and net interest
income.
(c) Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or market (market approximates
fair value). Gains and losses were recorded in principal transactions revenue.
(d) Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the
hedged item attributable to the hedged risk.
(e) The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward
points on foreign exchange forward contracts and time values.