Morgan Stanley 2015 Annual Report Download - page 172

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial Instruments Not Measured at Fair Value.
Valuation Techniques for Assets and Liabilities Not Measured at Fair Value.
Asset/Liability Valuation Technique
The following longer dated instruments:
-Securities purchased under agreements to resell
-Securities borrowed
-Securities sold under agreements to repurchase
-Securities loaned
-Other secured financings
Fair value is determined using a standard cash flow discounting
methodology.
The inputs to the valuation include contractual cash flows and collateral
funding spreads, which are estimated using various benchmarks and interest
rate yield curves.
HTM securities Fair value is determined using quoted market prices.
Loans The fair value of consumer and residential real estate loans and lending
commitments where position-specific external price data are not observable is
determined based on the credit risks of the borrower using a probability of
default and loss given default method, discounted at the estimated external
cost of funding level.
The fair value of corporate loans and lending commitments is determined
using the following:
-recently executed transactions
-market price quotations (where observable)
-implied yields from comparable debt
-market observable credit default swap spread levels along with
proprietary valuation models and default recovery analysis where such
transactions and quotations are unobservable
Long-term borrowings The fair value is generally determined based on transactional data or third-
party pricing for identical or comparable instruments, when available. Where
position-specific external prices are not observable, fair value is determined
based on current interest rates and credit spreads for debt instruments with
similar terms and maturity.
The carrying values of the remaining assets and liabilities not measured at fair value in the tables below approximate fair
value due to their short-term nature.
Financial Instruments Not Measured at Fair Value.
The tables below exclude certain financial instruments such as equity method investments and all non-financial assets and
liabilities such as the value of the long-term relationships with our deposit customers.
At December 31, 2015 Fair Value Measurements Using:
Carrying
Value Fair Value Level 1 Level 2 Level 3
(dollars in millions)
Financial Assets:
Cash and due from banks ............................................................$ 19,827 $ 19,827 $ 19,827 $ — $ —
Interest bearing deposits with banks .................................................... 34,256 34,256 34,256 — —
Cash deposited with clearing organizations or segregated under federal and other regulations or
requirements ................................................................... 31,469 31,469 31,469 — —
Investment securities—HTM securities ................................................. 5,224 5,188 998 4,190 —
Securities purchased under agreements to resell ........................................... 86,851 86,837 — 86,186 651
Securities borrowed ................................................................. 142,416 142,414 — 142,266 148
Customer and other receivables(1) ..................................................... 41,676 41,576 — 36,752 4,824
Loans(2) ......................................................................... 85,759 86,423 — 19,241 67,182
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