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HSBC BANK PLC
Notes on the Financial Statements (continued)
146
Key unobservable inputs to Level 3 financial instruments
The table below lists key unobservable inputs to level 3 financial instruments, and provides the range of those inputs as at
31 December 2014. A further description of the categories of key unobservable inputs is given below.
Fair value
Key
Full range
Core range
Assets
Liabilities
unobservable
of inputs
of inputs
£m
£m
Valuation technique
inputs
Lower
Higher
Lower
Higher
At 31 December 2014
Private equity including strategic
investments
691
28
See notes below
See notes below
n/a
n/a
n/a
n/a
Asset-backed securities
1,209
–
CLO/CDO1
600
–
Market proxy
Bid quotes
–
101
55
85
Other ABSs
609
–
Market proxy
Bid quotes
–
96
25
53
949
0
Structured notes
–
1,265
Equity-linked notes
–
601
Model – Option model
Equity volatility
10%
66%
16%
43%
Model – Option model
Equity correlation
38%
88%
44%
79%
Fund-linked notes
–
362
Model – Option model
Fund volatility
6%
8%
6%
8%
FX-linked notes
–
182
Model – Option model
FX volatility
3%
70%
3%
70%
Other
–
120
Derivatives
1,614
1,221
Interest rate derivatives:
– securitisation swaps
288
655
Model – DCF2
Prepayment rate
0%
50%
6%
18%
– long-dated swaptions
667
123
Model – Option model
IR volatility
8%
59%
17%
38%
– other
309
84
Foreign exchange derivatives:
– foreign exchange options
64
29
Model – Option model
FX volatility
0%
70%
7%
26%
Equity derivatives:
– long-dated single stock options
87
112
Model – Option model
Equity volatility
10%
66%
14%
38%
– other
132
188
Credit derivatives:
– other
67
30
Other portfolios
1,804
5
– structured certificates
1,001
5
Model – DCF2
Credit volatility
1%
3%
1%
3%
– other
803
–
5,318
2,519
Fair value
Key
Full range
Core range
Assets
Liabilities
unobservable
of inputs
of inputs
£m
£m
Valuation technique
inputs
Lower
Higher
Lower
Higher
At 31 December 2013
Private equity including strategic
investments
698
-
See notes below
See notes below
n/a
n/a
n/a
n/a
Asset-backed securities
1,275
-
CLO/CDO1
601
-
Market proxy
Bid quotes
-
102
46
95
Other ABSs
674
-
-
99
30
82
Structured notes
-
1,361
Equity-linked notes
-
649
Model – Option model
Equity volatility
7%
67%
13%
39%
Model – Option model
Equity correlation
54%
54%
54%
54%
Fund-linked notes
-
311
Model – Option model
Fund volatility
18%
22%
19%
21%
FX-linked notes
-
229
Model – Option model
FX volatility
0%
28%
0%
28%
Other
-
172
Derivatives
1,072
1,297
Interest rate derivatives:
– securitisation swaps
166
681
Model – DCF2
Prepayment rate
0%
22%
2%
20%
– long-dated swaptions
384
111
Model – Option model
IR volatility
4%
78%
13%
40%
– other
99
77
Foreign exchange derivatives:
– Foreign exchange options
89
109
Model – Option model
FX volatility
0%
28%
5%
13%
Equity derivatives:
– long-dated single stock options
226
228
Model – Option model
Equity volatility
7%
67%
13%
39%
– other
14
50
Credit derivatives:
– other
94
41
Other portfolios
1,242
-
4,287
2,658
1 Collateralised loan obligation/collateralised debt obligation
2 Discounted cash flow