JP Morgan Chase 2008 Annual Report Download - page 128
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Management’s discussion and analysis
126 JPMorgan Chase & Co./ 2008 Annual Report
In the normal course of business, JPMorgan Chase trades nonex-
change-traded commodity derivative contracts. To determine the fair
value of these contracts, the Firm uses various fair value estimation
techniques, primarily based upon internal models with significant
observable market parameters. The Firm’s nonexchange-traded com-
modity derivative contracts are primarily energy-related.
The following table summarizes the changes in fair value for nonex-
change-traded commodity derivative contracts for the year ended
December 31, 2008.
For the year ended
December 31, 2008 (in millions) Asset position Liability position
Net fair value of contracts
outstanding at January 1, 2008 $ 8,090 $ 5,809
Effect of legally enforceable master
netting agreements 26,108 25,957
Gross fair value of contracts
outstanding at January 1, 2008 34,198 31,766
Contracts realized or otherwise settled (12,773) (12,802)
Fair value of new contracts 40,916 39,194
Changes in fair values attributable to
changes in valuation techniques
and assumptions — —
Other changes in fair value (6,818) (4,293)
Gross fair value of contracts
outstanding at December 31, 2008 55,523 53,865
Effect of legally enforceable master
netting agreements (48,091) (48,726)
Net fair value of contracts
outstanding at December 31, 2008 $ 7,432 $ 5,139
The following table indicates the schedule of maturities of nonex-
change-traded commodity derivative contracts at December 31,
2008.
December 31, 2008 (in millions) Asset position Liability position
Maturity less than 1 year $ 27,282 $ 24,381
Maturity 1–3 years 22,463 20,047
Maturity 4–5 years 3,954 3,609
Maturity in excess of 5 years 1,824 5,828
Gross fair value of contracts
outstanding at December 31, 2008 55,523 53,865
Effects of legally enforceable master
netting agreements (48,091) (48,726)
Net fair value of contracts
outstanding at December 31, 2008 $ 7,432 $ 5,139
NONEXCHANGE-TRADED COMMODITY DERIVATIVE CONTRACTS AT FAIR VALUE