Freddie Mac 2012 Annual Report Download - page 271

Table 10.1 — Derivative Assets and Liabilities at Fair Value
At December 31, 2012 At December 31, 2011
Notional or
Contractual
Amount
Derivatives at Fair Value Notional or
Contractual
Amount
Derivatives at Fair Value
Assets(1) Liabilities(1) Assets(1) Liabilities(1)
(in millions)
Total derivative portfolio
Derivatives not designated as hedging instruments under the
accounting guidance for derivatives and hedging(2)
Interest-rate swaps:
Receive-fixed ....................................... $275,099 $ 13,782 $ (97) $211,808 $ 12,998 $ (108)
Pay-fixed .......................................... 270,092 177 (30,147) 289,335 19 (34,507)
Basis (floating to floating) .............................. 2,300 6 — 2,750 5 (7)
Total interest-rate swaps ............................. 547,491 13,965 (30,244) 503,893 13,022 (34,622)
Option-based:
Call swaptions
Purchased ........................................ 37,650 7,360 — 76,275 12,975 —
Written ......................................... 6,195 — (749) 27,525 — (2,932)
Put Swaptions
Purchased ........................................ 43,200 288 — 70,375 638 —
Written ......................................... — — — 500 — (2)
Other option-based derivatives(3) ......................... 31,540 2,449 (1) 38,549 2,256 (2)
Total option-based ................................. 118,585 10,097 (750) 213,224 15,869 (2,936)
Futures ............................................. 41,123 37 (2) 41,281 5 —
Foreign-currency swaps ................................. 1,167 73 (6) 1,722 106 (9)
Commitments ........................................ 25,530 20 (47) 14,318 38 (94)
Credit derivatives ...................................... 8,307 1 (5) 10,190 1 (5)
Swap guarantee derivatives ............................... 3,628 — (35) 3,621 — (37)
Total derivatives not designated as hedging instruments ........ 745,831 24,193 (31,089) 788,249 29,041 (37,703)
Netting adjustments(4) ................................... (23,536) 30,911 (28,923) 37,268
Total derivative portfolio, net ........................... $745,831 $ 657 $ (178) $788,249 $ 118 $ (435)
(1) The value of derivatives on our consolidated balance sheets is reported as derivative assets, net and derivative liabilities, net. Excludes $501 million and
$0 million of non-cash collateral held at December 31, 2012 and 2011, respectively.
(2) 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.
(3) Primarily includes purchased interest-rate caps and floors.
(4) Represents counterparty netting, cash collateral netting, net trade/settle receivable or payable, and net derivative interest receivable or payable. The net
cash collateral posted and net trade/settle receivable were $8.2 billion and $0 million, respectively, at December 31, 2012. The net cash collateral posted
and net trade/settle receivable were $9.4 billion and $1 million, respectively, at December 31, 2011. The net interest receivable (payable) of derivative
assets and derivative liabilities was approximately $(0.8) billion and $(1.1) billion at December 31, 2012 and 2011, respectively, which was mainly
related to interest-rate swaps.
The carrying value of our derivatives on our consolidated balance sheets is equal to their fair value, including net
derivative interest receivable or payable and net trade/settle receivable or payable and is net of cash collateral held or posted,
where allowable by a master netting agreement. Derivatives in a net asset position are reported as derivative assets, net.
Similarly, derivatives in a net liability position are reported as derivative liabilities, net. Cash collateral we obtained from
counterparties to derivative contracts that has been offset against derivative assets at December 31, 2012 and 2011 was
$1.5 billion and $3.2 billion, respectively. Cash collateral we posted to counterparties to derivative contracts that has been
offset against derivative liabilities at December 31, 2012 and 2011 was $9.7 billion and $12.6 billion, respectively. Non-cash
collateral held is not recognized on our consolidated balance sheets as we do not obtain effective control over the collateral,
and non-cash collateral posted is not de-recognized from our consolidated balance sheets as we do not relinquish effective
control over the collateral. Therefore, non-cash collateral held or posted is not presented as an offset against derivative assets
or derivative liabilities, even where a master netting agreement is in effect. See “NOTE 7: INVESTMENTS IN
SECURITIES — Collateral Pledged” for more information about collateral held and posted. We are subject to collateral
posting thresholds based on the credit rating of our long-term senior unsecured debt securities from S&P or Moody’s. The
lowering or withdrawal of our credit rating by S&P or Moody’s may increase our obligation to post collateral, depending on
the amount of the counterparty’s exposure to Freddie Mac with respect to the derivative transactions.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability
position on December 31, 2012, was $9.7 billion for which we posted collateral of $9.7 billion in the normal course of
business. Since we were fully collateralized as of December 31, 2012, we would not have had to post additional collateral on
that day if credit-risk-related contingent features underlying these agreements were triggered.
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