JP Morgan Chase 2014 Annual Report Download - page 217

JPMorgan Chase & Co./2014 Annual Report 215
The Firm does not use notional amounts of credit derivatives as the primary measure of risk management for such derivatives,
because the notional amount does not take into account the probability of the occurrence of a credit event, the recovery value
of the reference obligation, or related cash instruments and economic hedges, each of which reduces, in the Firm’s view, the
risks associated with such derivatives.
Total credit derivatives and credit-related notes
Maximum payout/Notional amount
Protection sold
Protection purchased
with identical
underlyings(c)
Net
protection
(sold)/
purchased(d)
Other
protection
purchased(e) December 31, 2014 (in millions)
Credit derivatives
Credit default swaps $ (2,056,982) $ 2,078,096 $ 21,114 $ 18,631
Other credit derivatives(a) (43,281) 32,048 (11,233) 19,475
Total credit derivatives (2,100,263) 2,110,144 9,881 38,106
Credit-related notes (40) — (40) 3,704
Total $ (2,100,303) $ 2,110,144 $ 9,841 $ 41,810
Maximum payout/Notional amount
Protection sold
Protection purchased
with identical
underlyings(c)
Net
protection
(sold)/
purchased(d)
Other
protection
purchased(e) December 31, 2013 (in millions)
Credit derivatives
Credit default swaps $ (2,601,581) $ 2,610,198 $ 8,617 $ 8,722
Other credit derivatives(a) (44,137) (b) 45,921 1,784 20,480 (b)
Total credit derivatives (2,645,718) 2,656,119 10,401 29,202
Credit-related notes (130) — (130) 2,720
Total $ (2,645,848) $ 2,656,119 $ 10,271 $ 31,922
(a) Other credit derivatives predominantly consists of credit swap options.
(b) The prior period amounts have been revised. This revision had no impact on the Firm’s Consolidated balance sheets or its results of operations.
(c) Represents the total notional amount of protection purchased where the underlying reference instrument is identical to the reference instrument on protection sold; the notional
amount of protection purchased for each individual identical underlying reference instrument may be greater or lower than the notional amount of protection sold.
(d) Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount the seller of protection pays to the
buyer of protection in determining settlement value.
(e) Represents protection purchased by the Firm on referenced instruments (single-name, portfolio or index) where the Firm has not sold any protection on the identical reference
instrument.
The following tables summarize the notional amounts by the ratings and maturity profile, and the total fair value, of credit
derivatives as of December 31, 2014 and 2013, where JPMorgan Chase is the seller of protection. The maturity profile is
based on the remaining contractual maturity of the credit derivative contracts. The ratings profile is based on the rating of the
reference entity on which the credit derivative contract is based. The ratings and maturity profile of credit derivatives and
credit-related notes where JPMorgan Chase is the purchaser of protection are comparable to the profile reflected below.
Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile
December 31, 2014
(in millions) <1 year 1–5 years >5 years Total notional amount Fair value of receivables(c) Fair value of payables(c) Net fair value
Risk rating of reference entity
Investment-grade $ (323,398) $ (1,118,293) $ (79,486) $ (1,521,177) $ 25,767 $ (6,314) $ 19,453
Noninvestment-grade (157,281) (396,798) (25,047) (579,126) 20,677 (22,455) (1,778)
Total $ (480,679) $ (1,515,091) $ (104,533) $ (2,100,303) $ 46,444 $ (28,769) $ 17,675
December 31, 2013
(in millions) <1 year 1–5 years >5 years Total notional
amount
Fair value of
receivables(c) Fair value of payables(c) Net fair value
Risk rating of reference entity
Investment-grade $ (368,712) (b) $ (1,469,773) (b) $ (93,209) (b) $ (1,931,694) (b) $ 31,730 (b) $ (5,664) (b) $ 26,066 (b)
Noninvestment-grade (140,540) (544,671) (28,943) (714,154) 27,426 (16,674) 10,752
Total $ (509,252) $ (2,014,444) $ (122,152) $ (2,645,848) $ 59,156 $ (22,338) $ 36,818
(a) The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s.
(b) The prior period amounts have been revised. This revision had no impact on the Firm’s Consolidated balance sheets or its results of operations.
(c) Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm.