Goldman Sachs 2012 Annual Report Download - page 159

Notes to Consolidated Financial Statements
In addition to the interests in the table above, the firm had
other continuing involvement in the form of derivative
transactions and guarantees with certain nonconsolidated
VIEs. The carrying value of these derivatives and
guarantees was a net asset of $45 million and a net liability
of $52 million as of December 2012 and December 2011,
respectively. The notional amounts of these derivatives and
guarantees are included in maximum exposure to loss in the
nonconsolidated VIE tables in Note 11.
The table below presents the weighted average key
economic assumptions used in measuring the fair value of
retained interests and the sensitivity of this fair value to
immediate adverse changes of 10% and 20% in
those assumptions.
As of December 2012 As of December 2011
Type of Retained Interests Type of Retained Interests
$ in millions Mortgage-Backed Other 1Mortgage-Backed Other 1
Fair value of retained interests $4,761 $ 51 $5,745 $ 32
Weighted average life (years) 8.2 2.0 7.1 4.7
Constant prepayment rate 210.9% N.M. 14.1% N.M.
Impact of 10% adverse change 2$ (57) N.M. $ (55) N.M.
Impact of 20% adverse change 2(110) N.M. (108) N.M.
Discount rate 34.6% N.M. 5.4% N.M.
Impact of 10% adverse change $ (96) N.M. $ (125) N.M.
Impact of 20% adverse change (180) N.M. (240) N.M.
1. Due to the nature and current fair value of certain of these retained interests, the weighted average assumptions for constant prepayment and discount rates and
the related sensitivity to adverse changes are not meaningful as of December 2012 and December 2011. The firm’s maximum exposure to adverse changes in the
value of these interests is the carrying value of $51 million and $32 million as of December 2012 and December 2011, respectively.
2. Constant prepayment rate is included only for positions for which constant prepayment rate is a key assumption in the determination of fair value.
3. The majority of mortgage-backed retained interests are U.S. government agency-issued collateralized mortgage obligations, for which there is no anticipated credit
loss. For the remainder of retained interests, the expected credit loss assumptions are reflected in the discount rate.
The preceding table does not give effect to the offsetting
benefit of other financial instruments that are held to
mitigate risks inherent in these retained interests. Changes
in fair value based on an adverse variation in assumptions
generally cannot be extrapolated because the relationship
of the change in assumptions to the change in fair value is
not usually linear. In addition, the impact of a change in a
particular assumption in the preceding table is calculated
independently of changes in any other assumption. In
practice, simultaneous changes in assumptions might
magnify or counteract the sensitivities disclosed above.
Goldman Sachs 2012 Annual Report 157