Morgan Stanley 2015 Annual Report Download - page 164

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Balance at
December 31, 2014
Valuation Technique(s) /
Significant Unobservable Input(s) /
Sensitivity of the Fair Value to Changes in the
Unobservable Inputs Range(1) Averages(2)
(dollars in millions)
Foreign exchange contracts(6) 151 Option model:
Interest rate quanto correlation / (A)(D) -9% to 35% 6% / - 6%(5)
Interest rate-Credit spread correlation / (A)(D) -54% to -2% -17% / - 11%(5)
Interest rate curve correlation / (A)(D) 44% to 87% 73% / 80%(5)
Interest rate-Foreign exchange correlation / (A)(D) 28% to 62% 44% /42%(5)
Interest rate curve / (A)(D) 0% to 2% 1% / 1 %(5)
Equity contracts(6)(7) (2,165) Option model:
At the money volatility / (A)(D) 14% to 51% 29%
Volatility skew / (A)(D) -2% to 0% -1%
Equity-Equity correlation / (C)(D) 40% to 99% 72%
Equity-Foreign exchange correlation / (C)(D) -50% to 10% -16%
Equity-Interest rate correlation / (C)(D) -18% to 81% 26% /11%(5)
Commodity contracts 1,146 Option model:
Forward power price / (C)(D) $5 to $106 per $38 per
megawatt hour megawatt hour
Commodity volatility / (A)(D) 11% to 90% 19%
Cross commodity correlation / (C)(D) 33% to 100% 93%
Investments:
Principal investments 835 Discounted cash flow:
Implied weighted average cost of capital / (C)(D) 11% 11%
Exit multiple / (A)(D) 10 times 10 times
Discounted cash flow:
Equity discount rate / (C) 25% 25%
Market approach(3):
EBITDA multiple / (A)(D) 4 to 14 times 10 times
Price / Earnings ratio / (A)(D) 23 times 23 times
Forward capacity price / (A)(D) $5 to $7 $7
Comparable pricing:
Comparable equity price / (A) 64% to 100% 95%
Other 323 Discounted cash flow:
Implied weighted average cost of capital / (C)(D) 10% to 13% 11%
Exit multiple / (A)(D) 6 to 9 times 9 times
Market approach:
EBITDA multiple / (A)(D) 9 to 13 times 10 times
Comparable pricing(3):
Comparable equity price / (A) 100% 100%
Liabilities at Fair Value
Trading liabilities:
Corporate and other debt:
Corporate bonds $ 78 Option model:
Volatility skew / (C)(D) -1% -1%
At the money volatility / (C)(D) 10% 10%
Securities sold under agreements to repurchase 153 Discounted cash flow:
Funding spread / (A) 75 to 91 bps 86 bps
Other secured financings 149 Comparable pricing:
Comparable bond price / (A) 99 to 101 points 100 points
Discounted cash flow(3):
Funding spread / (A) 82 to 98 bps 95 bps
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