Morgan Stanley 2014 Annual Report Download - page 249

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MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party.
These bilateral downgrade arrangements are a risk management tool used extensively by the Company as credit
exposures are reduced if counterparties are downgraded.
Credit Derivatives and Other Credit Contracts.
The Company enters into credit derivatives, principally through credit default swaps, under which it receives or
provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or
entities. A majority of the Company’s counterparties are banks, broker-dealers, insurance and other financial
institutions, and monoline insurers.
The tables below summarize the notional and fair value of protection sold and protection purchased through
credit default swaps at December 31, 2014 and December 31, 2013:
At December 31, 2014
Maximum Potential Payout/Notional
Protection Sold Protection Purchased
Notional
Fair Value
(Asset)/Liability Notional
Fair Value
(Asset)/Liability
(dollars in millions)
Single name credit default swaps ................ $ 535,415 $ (2,479) $ 509,872 $ 1,641
Index and basket credit default swaps ............. 276,465 (1,777) 229,789 1,563
Tranched index and basket credit default swaps ..... 96,182 (2,355) 194,343 3,334
Total ...................................... $ 908,062 $ (6,611) $ 934,004 $ 6,538
At December 31, 2013
Maximum Potential Payout/Notional
Protection Sold Protection Purchased
Notional
Fair Value
(Asset)/Liability Notional
Fair Value
(Asset)/Liability
(dollars in millions)
Single name credit default swaps ................ $ 799,838 $ (9,349) $ 758,536 $ 8,564
Index and basket credit default swaps ............. 454,355 (3,756) 361,961 2,827
Tranched index and basket credit default swaps ..... 146,597 (3,889) 276,881 3,883
Total ...................................... $1,400,790 $(16,994) $1,397,378 $15,274
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