JP Morgan Chase 2015 Annual Report Download - page 226

Notes to consolidated financial statements
216 JPMorgan Chase & Co./2015 Annual Report
Liquidity impact of downgrade triggers on OTC and OTC-cleared derivatives
2015 2014
December 31, (in millions)
Single-notch
downgrade
Two-notch
downgrade
Single-notch
downgrade
Two-notch
downgrade
Amount of additional collateral to be posted upon downgrade(a) $ 807 $ 3,028 $ 1,046 $ 3,331
Amount required to settle contracts with termination triggers upon downgrade(b) 271 1,093 366 1,388
(a) Includes the additional collateral to be posted for initial margin.
(b) Amounts represent fair values of derivative payables, and do not reflect collateral posted.
Derivatives executed in contemplation of a sale of the underlying financial asset
In certain instances the Firm enters into transactions in which it transfers financial assets but maintains the economic exposure
to the transferred assets by entering into a derivative with the same counterparty in contemplation of the initial transfer. The
Firm generally accounts for such transfers as collateralized financing transactions as described in Note 13, but in limited
circumstances they may qualify to be accounted for as a sale and a derivative under U.S. GAAP. The amount of such transfers
accounted for as a sale where the associated derivative was outstanding at December 31, 2015 was not material.
Impact of derivatives on the Consolidated statements of income
The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting
designation or purpose.
Fair value hedge gains and losses
The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well
as pretax gains/(losses) recorded on such derivatives and the related hedged items for the years ended December 31, 2015,
2014 and 2013, respectively. The Firm includes gains/(losses) on the hedging derivative and the related hedged item in the
same line item in the Consolidated statements of income.
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2015 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(d)
Excluded
components(e)
Contract type
Interest rate(a) $ 38 $ 911 $ 949 $ 3 $ 946
Foreign exchange(b) 6,030 (6,006) 24 — 24
Commodity(c) 1,153 (1,142) 11 (13) 24
Total $ 7,221 $ (6,237) $ 984 $ (10) $ 994
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2014 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(d)
Excluded
components(e)
Contract type
Interest rate(a) $ 2,106 $ (801) $ 1,305 $ 131 $ 1,174
Foreign exchange(b) 8,279 (8,532) (253) — (253)
Commodity(c) 49 145 194 42 152
Total $ 10,434 $ (9,188) $ 1,246 $ 173 $ 1,073
Gains/(losses) recorded in income Income statement impact due to:
Year ended December 31, 2013 (in millions) Derivatives Hedged items
Total income
statement
impact
Hedge
ineffectiveness(d)
Excluded
components(e)
Contract type
Interest rate(a) $ (3,469) $ 4,851 $ 1,382 $ (132) $ 1,514
Foreign exchange(b) (1,096) 864 (232) — (232)
Commodity(c) 485 (1,304) (819) 38 (857)
Total $ (4,080) $ 4,411 $ 331 $ (94) $ 425
(a) Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS
securities. Gains and losses were recorded in net interest income.
(b) Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses
related to the derivatives and the hedged items, due to changes in foreign currency rates, were recorded primarily in principal transactions revenue and
net interest income.