Morgan Stanley 2014 Annual Report Download - page 241

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
At December 31, 2013
Gross Amounts(1)
Amounts Offset
in the
Consolidated
Statements of
Financial
Condition(2)
Net Amounts
Presented in the
Consolidated
Statements of
Financial
Condition
Amounts Not Offset in the
Consolidated Statements of
Financial Condition(3)
Net
Exposure
Financial
Instruments
Collateral
Other Cash
Collateral
(dollars in millions)
Derivative assets
Bilateral OTC ........ $404,352 $(378,459) $25,893 $(8,785) $(132) $16,976
Cleared OTC(4) ....... 267,057 (266,419) 638 — — 638
Exchange traded ...... 31,609 (25,673) 5,936 — — 5,936
Total derivative
assets ......... $703,018 $(670,551) $32,467 $(8,785) $(132) $23,550
Derivative liabilities
Bilateral OTC ........ $386,199 $(361,059) $25,140 $(5,365) $(136) $19,639
Cleared OTC(4) ....... 266,559 (265,378) 1,181 — (372) 809
Exchange traded ...... 33,113 (25,673) 7,440 (651) — 6,789
Total derivative
liabilities ...... $685,871 $(652,110) $33,761 $(6,016) $(508) $27,237
(1) Amounts include $8.7 billion of derivative assets and $7.3 billion of derivative liabilities, which are either not subject to master netting
agreements or collateral agreements or are subject to such agreements but the Company has not determined the agreements to be legally
enforceable. See also “Fair Value and Notional of Derivative Instruments” for additional disclosure about gross fair values and notionals
for derivative instruments by risk type.
(2) Amounts relate to master netting agreements and collateral agreements, which have been determined by the Company to be legally
enforceable in the event of default and where certain other criteria are met in accordance with applicable offsetting accounting guidance.
(3) Amounts relate to master netting agreements and collateral agreements, which have been determined by the Company to be legally
enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting
guidance.
(4) Amounts include OTC derivatives that are centrally cleared in accordance with certain regulatory requirements.
The Company incurs credit risk as a dealer in OTC derivatives. Credit risk with respect to derivative instruments
arises from the failure of a counterparty to perform according to the terms of the contract. The Company’s
exposure to credit risk at any point in time is represented by the fair value of the derivative contracts reported as
assets. The fair value of a derivative represents the amount at which the derivative could be exchanged in an
orderly transaction between market participants and is further described in Notes 2 and 4.
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