Freddie Mac 2011 Annual Report Download - page 270

At December 31, 2011 and 2010, there were no amounts of cash collateral that were not offset against derivative
assets, net or derivative liabilities, net, as applicable. See “NOTE 16: CONCENTRATION OF CREDIT AND OTHER
RISKS” for further information related to our derivative counterparties.
Gains and Losses on Derivatives
The table below presents the gains and losses on derivatives reported in our consolidated statements of income and
comprehensive income.
Table 11.2 — Gains and Losses on Derivatives
Derivatives in Cash Flow
Hedging Relationships
(1)(2)
2011 2010 2009
Year Ended December 31,
Amount of Gain or (Loss) Reclassified from
AOCI into Earnings (Effective Portion)
(in millions)
Closed cash flow hedges
(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (758) $ (1,010) $ (1,165)
Derivatives not designated as hedging
instruments under the accounting
guidance for derivatives and hedging
(5)
2011 2010 2009
Year Ended December 31,
Derivative Gains (Losses)
(4)
(in millions)
Interest-rate swaps:
Receive-fixed
Foreign-currency denominated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (49) $ (119) $ 64
U.S. dollar denominated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,686 9,825 (13,337)
Total receive-fixed swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,637 9,706 (13,273)
Pay-fixed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,999) (17,450) 27,078
Basis (floating to floating) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 65 (194)
Total interest-rate swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,367) (7,679) 13,611
Option based:
Call swaptions
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,234 6,548 (10,566)
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,337) (199) 248
Put swaptions
Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,614) (1,621) 323
Written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 82 (321)
Other option-based derivatives
(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879 33 (370)
Total option-based . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,176 4,843 (10,686)
Futures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (154) (210) (300)
Foreign-currency swaps
(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41) (468) 138
Commitments
(8)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,340) (85) (708)
Credit derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5 (4)
Swap guarantee derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 (20)
Other
(9)
................................................................. 3 — 12
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,720) (3,591) 2,043
Accrual of periodic settlements:
(10)
Receive-fixed interest-rate swaps
(11)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,173 6,381 5,817
Pay-fixed interest-rate swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,241) (10,909) (9,964)
Foreign-currency swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 19 89
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 115
Total accrual of periodic settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,032) (4,494) (3,943)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (9,752) $ (8,085) $ (1,900)
(1) Derivatives that meet specific criteria may be accounted for as cash flow hedges. Net deferred gains and losses on closed cash flow hedges (i.e.,
where the derivative is either terminated or redesignated) are also included in AOCI until the related forecasted transaction affects earnings or is
determined to be probable of not occurring.
(2) No amounts of gains or (losses) were recognized in AOCI on derivatives (effective portion) and in other income (ineffective portion and amount
excluded from effectiveness testing).
(3) Amounts reported in AOCI related to changes in the fair value of commitments to purchase securities that were designated as cash flow hedges are
recognized as basis adjustments to the related assets, which are amortized in earnings as interest income. Amounts linked to interest payments on
long-term debt are recorded in other debt interest expense and amounts not linked to interest payments on long-term debt are recorded in expense
related to derivatives.
(4) Gains (losses) are reported as derivative gains (losses) on our consolidated statements of income and comprehensive income.
(5) See “Use of Derivatives” for additional information about the purpose of entering into derivatives not designated as hedging instruments and our
overall risk management strategies.
(6) Primarily includes purchased interest-rate caps and floors.
(7) Foreign-currency swaps are defined as swaps in which the net settlement is based on one leg calculated in a foreign-currency and the other leg
calculated in U.S. dollars.
(8) Commitments include: (a) our commitments to purchase and sell investments in securities; (b) our commitments to purchase mortgage loans; and
(c) our commitments to purchase and extinguish or issue debt securities of our consolidated trusts.
(9) Related to the bankruptcy of Lehman Brothers Holdings, Inc., or Lehman.
(10) For derivatives not in qualifying hedge accounting relationships, the accrual of periodic cash settlements is recorded in derivative gains (losses) on
our consolidated statements of income and comprehensive income.
(11) Includes imputed interest on zero-coupon swaps.
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