JP Morgan Chase 2015 Annual Report Download - page 230

Notes to consolidated financial statements
220 JPMorgan Chase & Co./2015 Annual Report
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(b)
Net
protection
(sold)/
purchased(c)
Other
protection
purchased(d) December 31, 2015 (in millions)
Credit derivatives
Credit default swaps $ (1,386,071) $ 1,402,201 $ 16,130 $ 12,011
Other credit derivatives(a) (42,738) 38,158 (4,580) 18,792
Total credit derivatives (1,428,809) 1,440,359 11,550 30,803
Credit-related notes (30) — (30) 4,715
Total $ (1,428,839) $ 1,440,359 $ 11,520 $ 35,518
Maximum payout/Notional amount
Protection sold
Protection purchased
with identical
underlyings(b)
Net
protection
(sold)/
purchased(c)
Other
protection
purchased(d) 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
(a) Other credit derivatives predominantly consists of credit swap options.
(b) 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.
(c) 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.
(d) 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 and credit-related notes as of December 31, 2015 and 2014, 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, 2015
(in millions) <1 year 1–5 years >5 years
Total notional
amount
Fair value of
receivables(b)
Fair value of
payables(b)
Net fair
value
Risk rating of reference entity
Investment-grade $ (307,211) $ (699,227) $ (46,970) $ (1,053,408) $ 13,539 $ (6,836) $ 6,703
Noninvestment-grade (109,195) (245,151) (21,085) (375,431) 10,823 (18,891) (8,068)
Total $ (416,406) $ (944,378) $ (68,055) $ (1,428,839) $ 24,362 $ (25,727) $ (1,365)
December 31, 2014
(in millions) <1 year 1–5 years >5 years
Total notional
amount
Fair value of
receivables(b)
Fair value of
payables(b)
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
(a) The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s Investors Service (“Moody’s”).
(b) Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm.