JP Morgan Chase 2015 Annual Report Download - page 144

Management’s discussion and analysis
134 JPMorgan Chase & Co./2015 Annual Report
The following table summarizes by LOB the predominant business activities that give rise to market risk, and the market risk
management tools utilized to manage those risks; CB is not presented in the table below as it does not give rise to significant
market risk.
Risk identification and classification for business activities
LOB
Predominant business activities and
related market risks
Positions included in Risk
Management VaR
Positions included in other risk
measures (Not included in Risk
Management VaR)
CIB • Makes markets and services clients
across fixed income, foreign
exchange, equities and commodities
• Market risk arising from changes
in market prices (e.g. rates and
credit spreads) resulting in a
potential decline in net income
• Market risk(a) related to:
• Trading assets/liabilities – debt
and equity instruments, and
derivatives, including hedges of
the retained loan portfolio
• Certain securities purchased
under resale agreements and
securities borrowed
• Certain securities loaned or sold
under repurchase agreements
• Structured notes
• Derivative CVA and associated
hedges
• Principal investing activities
• Retained loan portfolio
• Deposits
• DVA and FVA on derivatives and
structured notes
CCB • Originates and services mortgage
loans
• Complex, non-linear interest rate
and basis risk
• Non-linear risk arises primarily
from prepayment options
embedded in mortgages and
changes in the probability of
newly originated mortgage
commitments actually closing
• Basis risk results from differences
in the relative movements of the
rate indices underlying mortgage
exposure and other interest rates
Mortgage Banking
• Mortgage pipeline loans, classified
as derivatives
• Warehouse loans, classified as
trading assets – debt instruments
• MSRs
• Hedges of pipeline loans,
warehouse loans and MSRs,
classified as derivatives.
• Interest-only securities, classified
as trading assets, and related
hedges, classified as derivatives
• Retained loan portfolio
• Deposits
• Principal investing activities
Corporate • Manages the Firm’s liquidity,
funding, structural interest rate and
foreign exchange risks arising from
activities undertaken by the Firm’s
four major reportable business
segments
Treasury and CIO
• Primarily derivative positions
measured at fair value through
earnings, classified as derivatives
• Principal investing activities
• Investment securities portfolio and
related hedges
• Deposits
• Long-term debt and related hedges
AM • Market risk arising from the Firm’s
initial capital investments in
products, such as mutual funds,
managed by AM
• Initial seed capital investments and
related hedges, classified as
derivatives
• Capital invested alongside third-
party investors, typically in privately
distributed collective vehicles
managed by AM (i.e., co-
investments)
• Retained loan portfolio
• Deposits
(a) Market risk measurement for derivatives generally incorporates the impact of DVA and FVA; market risk measurement for structured notes generally
excludes the impact of FVA and DVA.