JP Morgan Chase 2006 Annual Report Download - page 89

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JPMorgan Chase & Co. / 2006 Annual Report 87
In the normal course of business, JPMorgan Chase trades nonexchange-traded
commodity derivative contracts. To determine the fair value of these contracts,
the Firm uses various fair value estimation techniques, which are primarily
based upon internal models with significant observable market parameters.
The Firm’s nonexchange-traded commodity derivative contracts are primarily
energy-related contracts. The following table summarizes the changes in fair
value for nonexchange-traded commodity derivative contracts for the year
ended December 31, 2006:
For the year ended
December 31, 2006 (in millions) Asset position Liability position
Net fair value of contracts
outstanding at January 1, 2006 $ 6,951 $ 5,324
Effect of legally enforceable master
netting agreements 10,014 10,078
Gross fair value of contracts
outstanding at January 1, 2006 16,965 15,402
Contracts realized or otherwise settled
during the period (12,417) (12,206)
Fair value of new contracts 21,554 21,007
Changes in fair values attributable to
changes in valuation techniques
and assumptions ——
Other changes in fair value (601) (317)
Gross fair value of contracts
outstanding at December 31, 2006 25,501 23,886
Effect of legally enforceable master
netting agreements (19,671) (19,980)
Net fair value of contracts
outstanding at December 31, 2006 $ 5,830 $ 3,906
The following table indicates the schedule of maturities of nonexchange-
traded commodity derivative contracts at December 31, 2006:
December 31, 2006 (in millions) Asset position Liability position
Maturity less than 1 year $ 10,897 $ 11,039
Maturity 1–3 years 10,784 9,666
Maturity 4–5 years 2,630 1,838
Maturity in excess of 5 years 1,190 1,343
Gross fair value of contracts
outstanding at December 31, 2006 25,501 23,886
Effects of legally enforceable master
netting agreements (19,671) (19,980)
Net fair value of contracts
outstanding at December 31, 2006 $ 5,830 $ 3,906
NONEXCHANGE-TRADED COMMODITY DERIVATIVE CONTRACTS AT FAIR VALUE