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Management’s discussion and analysis
156 JPMorgan Chase & Co./2010 Annual Report
NONEXCHANGE-TRADED COMMODITY DERIVATIVE CONTRACTS AT FAIR VALUE
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 esti-
mation techniques, primarily based on internal models with signifi-
cant observable market parameters. The Firm’s nonexchange-
traded commodity 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, 2010.
For the year ended
December 31, 2010
(in millions) Asset position Liability position
Net fair value of contracts ou
t
standing
at January 1, 2010 $ 5,027
$ 1,737
Effect of legally enforc
e
able master netting
agreements 25,282
26,490
Gross fair value of contracts
outstanding at January 1, 2010 30,309
28,227
Contracts realized or otherwise settled
(18,309)
(17
,
232
)
Fair value of new co
n
tracts
24,294
23,194
Changes in fair values attribu
t
able to
changes in valuation techniques and
assumptions —
—
Other changes
in fair value
13,156
14,
914
Gross fair value of contracts
outstanding at December 31, 2010 49,450
49,103
Effect of legally enforc
e
able master netting
agreements (41,284)
(41,919)
Net fair value of contracts
outstanding at December 31, 2010 $ 8,166
$ 7,184
The following table indicates the maturities of nonexchange-traded
commodity derivative contracts at December 31, 2010.
December 31, 20
10
(in millions)
Asset pos
i
tion
Liability position
Maturity less than 1 year
$
22,71
3
$
19
,40
2
Maturity 1
–
3 years
16,6
89
16,074
Maturity 4
–
5 years
8,500
7,840
Maturity in excess of 5 years
1,548
5,787
Gross fair value of contracts
outstanding at December 31, 2010
49,450 49,103
Effect of legally enforceable master
netting agreements (41,284)
(41,919)
Net fair value of contracts
outstanding at December 31, 2010
$ 8,166 $ 7,184