Morgan Stanley 2015 Annual Report Download - page 162

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Balance at
December 31, 2015
Valuation Technique(s) /
Significant Unobservable Input(s) /
Sensitivity of the Fair Value to Changes
in the Unobservable Inputs Range(1) Averages(2)
(dollars in millions)
Investments:
Principal investments 486 Discounted cash flow:
Implied weighted average cost of capital / (C)(D) 16% 16%
Exit multiple / (A)(D) 8 to 14 times 9 times
Capitalization rate / (C)(D) 5% to 9% 6%
Equity discount rate / (C)(D) 20% to 35% 26%
Market approach(3):
EBITDA multiple / (A)(D) 8 to 20 times 11 times
Forward capacity price / (A)(D) $5 to $9 $7
Comparable pricing:
Comparable equity price / (A) 43% to 100% 81%
Other 221 Discounted cash flow:
Implied weighted average cost of capital / (C)(D) 10% 10%
Exit multiple / (A)(D) 13 times 13 times
Market approach:
EBITDA multiple / (A) 7 to 14 times 12 times
Comparable pricing(3):
Comparable equity price / (A) 100% 100%
Liabilities at Fair Value
Securities sold under agreements to repurchase 151 Discounted cash flow:
Funding spread / (A) 86 to 116 bps 105 bps
Other secured financings 461 Option model:
Volatility skew / (C) -1% -1%
Discounted cash flow(3):
Discount rate / (C) 4% to 13% 4%
Discounted cash flow:
Funding spread / (A) 95 to 113 bps 104 bps
Long-term borrowings 1,987 Option model(3):
At the money volatility / (C)(D) 20% to 50% 29%
Volatility skew / (A)(D) -1% to 0% -1%
Equity-Equity correlation / (A)(D) 40% to 97% 77%
Equity-Foreign exchange correlation / (C)(D) -70% to -11% -39%
Option model:
Interest rate volatility skew / (A)(D) 50% 50%
Equity volatility discount / (A)(D) 10% 10%
Correlation model:
Credit correlation / (B) 40% to 60% 52%
Comparable pricing:
Comparable equity price / (A) 100% 100%
Balance at
December 31, 2014
Valuation Technique(s) /
Significant Unobservable Input(s) /
Sensitivity of the Fair Value to Changes in the
Unobservable Inputs Range(1) Averages(2)
(dollars in millions)
Assets at Fair Value
Trading assets:
Corporate and other debt:
Residential mortgage-backed securities $ 175 Comparable pricing:
Comparable bond price / (A) 3 to 90 points 15 points
Commercial mortgage-backed securities 96 Comparable pricing:
Comparable bond price / (A) 0 to 7 points 1 point
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