JP Morgan Chase 2012 Annual Report Download - page 190

Notes to consolidated financial statements
200 JPMorgan Chase & Co./2012 Annual Report
Product/instrument Valuation methodology, inputs and assumptions Classification in the valuation hierarchy
Mortgage servicing rights
(“MSRs”)
See Mortgage servicing rights in Note 17 on pages 292-294 of this
Annual Report.
Level 3
Private equity direct investments Private equity direct investments Level 3
Fair value is estimated using all available information and considering
the range of potential inputs, including:
• Transaction prices
• Trading multiples of comparable public companies
• Operating performance of the underlying portfolio company
• Additional available inputs relevant to the investment
• Adjustments as required, since comparable public companies are
not identical to the company being valued, and for company-
specific issues and lack of liquidity
Public investments held in the Private Equity portfolio Level 1 or 2
• Valued using observable market prices less adjustments for
relevant restrictions, where applicable
Fund investments (i.e., mutual/
collective investment funds,
private equity funds, hedge
funds, and real estate funds)
Net asset value (“NAV”)
• NAV is validated by sufficient level of observable activity (i.e.,
purchases and sales)
Level 1
• Adjustments to the NAV as required, for restrictions on
redemption (e.g., lock up periods or withdrawal limitations) or
where observable activity is limited
Level 2 or 3
Beneficial interests issued by
consolidated VIE
Valued using observable market information, where available Level 2 or 3
In the absence of observable market information, valuations are
based on the fair value of the underlying assets held by the VIE
Long-term debt, not carried at
fair value
Valuations are based on discounted cash flows, which consider: Predominantly level 2
• Market rates for respective maturity
• The Firm’s own creditworthiness (DVA), see page 212 of this Note
Structured notes (included in
deposits, other borrowed funds
and long-term debt)
Valuations are based on discounted cash flows, which consider: Level 2 or 3
• The Firm’s own creditworthiness (DVA), see page 212 of this Note
• Consideration of derivative features. For further information refer
to discussion on derivatives above