US Bank 2002 Annual Report Download - page 49

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Derivative Positions
Asset and Liability Management Positions
Weighted-
Average
Maturing Remaining
December 31, 2002 Fair Maturity
(Dollars in Millions) 2003 2004 2005 2006 2007 Thereafter Total Value in Years
Interest rate contracts
Receive fixed/pay floating swaps
Notional amount********************* $ 606 $ 473 $1,761 $5,320 $5,670 $5,900 $19,730 $1,555 6.67
Weighted-average
Receive rate ********************* 6.02% 6.86% 5.50% 3.54% 4.59% 6.51% 5.06%
Pay rate************************* 1.51 1.48 1.57 1.42 1.44 1.88 1.58
Pay fixed/receive floating swaps
Notional amount********************* $2,200 $2,050 $ 365 $ — $ — $ 150 $ 4,765 $ (117) 1.64
Weighted-average
Receive rate ********************* 1.42% 1.42% 1.77% — — 1.31% 1.45%
Pay rate************************* 2.74 3.81 4.28 — — 4.47 3.34
Futures and forwards ******************* $6,850 $ — $ — $ — $ — $ — $ 6,850 $ (80) .13
Options
Written ***************************** 2,940 — — 45 — — 2,985 26 .13
Equity contracts ************************ $ — $ — $ 5 $ — $ — $ — $ 5 $ — 2.92
Customer-related Positions
Weighted-
Average
Maturing Remaining
December 31, 2002 Fair Maturity
(Dollars in Millions) 2003 2004 2005 2006 2007 Thereafter Total Value in Years
Interest rate contracts
Receive fixed/pay floating swaps
Notional amount********************* $ 715 $ 564 $ 652 $ 630 $ 502 $ 978 $ 4,041 $ 223 4.00
Pay fixed/receive floating swaps
Notional amount********************* 700 564 652 630 502 978 4,026 (201) 3.98
Basis swaps *************************** — 1 — — — — 1 — 1.67
Options
Purchased************************** 266 35 10 15 63 9 398 4 1.67
Written ***************************** 261 35 10 15 63 9 393 (4) 1.75
Foreign exchange rate contracts
Swaps and forwards
Buy ******************************** $3,292 $ 14 $ — $ — $ — $ — $ 3,306 $ 213 .50
Sell ******************************** 3,292 14——— —3,306 (212) .50
Options
Purchased************************** 199———— —199 8.57
Written ***************************** 199———— —199(8).57
Market Risk Management In addition to interest rate risk, modeling and actual results could differ from those
the Company is exposed to other forms of market risk as a assumptions and estimates. The Company mitigates these
consequence of conducting normal trading activities. uncertainties through regular monitoring of trading
Business activities that contribute to market risk include, activities by management and other risk management
among other things, market making, underwriting, practices including stop-loss and position limits related to
proprietary trading and foreign exchange positions. Value at its trading activities. Stress-test models are used to provide
Risk (‘‘VaR’’) is a key measure of market risk for the management with perspectives on market events that VaR
Company. Theoretically, VaR represents the maximum models do not capture.
amount that the Company has placed at risk of loss, with a The Company establishes market risk limits, subject
ninety-ninth percentile degree of confidence, to adverse to approval by the Company’s Board of Directors. The
market movements in the course of its risk taking activities. Company’s VaR limit was $40 million at December 31,
VaR modeling of trading activities is subject to certain 2002 and 2001. The market valuation risk inherent in its
limitations. Additionally, it should be recognized that there customer-based derivative trading, mortgage banking
are assumptions and estimates associated with VaR pipeline, broker-dealer activities (including equities,
U.S. Bancorp 47
Table 17