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Derivative Instruments
 3 Months Ended
Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
Derivative instruments
JPMorgan Chase makes markets in derivatives for clients and also uses derivatives to hedge or manage its own risk exposures. For a further discussion of the Firm’s use of and accounting policies regarding derivative instruments, see Note 6 of JPMorgan Chase’s 2015 Annual Report.
The Firm’s disclosures are based on the accounting treatment and purpose of these derivatives. A limited number of the Firm’s derivatives are designated in hedge accounting relationships and are disclosed according to the type of hedge (fair value hedge, cash flow hedge, or net investment hedge). Derivatives not designated in hedge accounting relationships include certain derivatives that are used to manage certain risks associated with specified assets or liabilities (“specified risk management” positions) as well as derivatives used in the Firm’s market-making businesses or for other purposes.

The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure category.
Type of Derivative
Use of Derivative
Designation and disclosure
Affected
segment or unit
10-Q page reference
Manage specifically identified risk exposures in qualifying hedge accounting relationships:
 
 
 
◦ Interest rate
Hedge fixed rate assets and liabilities
Fair value hedge
Corporate
95
◦ Interest rate
Hedge floating-rate assets and liabilities
Cash flow hedge
Corporate
95–96
◦
 Foreign exchange
Hedge foreign currency-denominated assets and liabilities
Fair value hedge
Corporate
95
◦
 Foreign exchange
Hedge forecasted revenue and expense
Cash flow hedge
Corporate
95–96
◦
 Foreign exchange
Hedge the value of the Firm’s investments in non-U.S. subsidiaries
Net investment hedge
Corporate
96
◦
 Commodity
Hedge commodity inventory
Fair value hedge
CIB
95
Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships:
 
 
 
◦
 Interest rate
Manage the risk of the mortgage pipeline, warehouse loans and MSRs
Specified risk management
CCB
96
◦
 Credit
Manage the credit risk of wholesale lending exposures
Specified risk management
CIB
96
◦
 Commodity
Manage the risk of certain commodities-related contracts and investments
Specified risk management
CIB
96
◦
 Interest rate and foreign exchange
Manage the risk of certain other specified assets and liabilities
Specified risk management
Corporate
96
Market-making derivatives and other activities:
 
 
 
◦
 Various
Market-making and related risk management
Market-making and other
CIB
96
◦
 Various
Other derivatives
Market-making and other
CIB, Corporate
96

Notional amount of derivative contracts
The following table summarizes the notional amount of derivative contracts outstanding as of March 31, 2016, and December 31, 2015.
 
Notional amounts(b)
(in billions)
March 31, 2016
December 31, 2015
Interest rate contracts
 
 
Swaps
$
25,334

$
24,162

Futures and forwards
5,355

5,167

Written options
3,355

3,506

Purchased options
3,705

3,896

Total interest rate contracts
37,749

36,731

Credit derivatives(a)
3,137

2,900

Foreign exchange contracts
 
 
Cross-currency swaps
3,360

3,199

Spot, futures and forwards
5,677

5,028

Written options
813

690

Purchased options
803

706

Total foreign exchange contracts
10,653

9,623

Equity contracts
 
 
Swaps
246

232

Futures and forwards
42

43

Written options
447

395

Purchased options
376

326

Total equity contracts
1,111

996

Commodity contracts
 
 
Swaps
80

83

Spot, futures and forwards
115

99

Written options
124

115

Purchased options
121

112

Total commodity contracts
440

409

Total derivative notional amounts
$
53,090

$
50,659

(a)
For more information on volumes and types of credit derivative contracts, see the Credit derivatives discussion on page 97.
(b)
Represents the sum of gross long and gross short third-party notional derivative contracts.
While the notional amounts disclosed above give an indication of the volume of the Firm’s derivatives activity, the notional amounts significantly exceed, in the Firm’s view, the possible losses that could arise from such transactions. For most derivative transactions, the notional amount is not exchanged; it is used simply as a reference to calculate payments.
Impact of derivatives on the Consolidated Balance Sheets
The following table summarizes information on derivative receivables and payables (before and after netting adjustments) that are reflected on the Firm’s Consolidated balance sheets as of March 31, 2016, and December 31, 2015, by accounting designation (e.g., whether the derivatives were designated in qualifying hedge accounting relationships or not) and contract type.
Free-standing derivative receivables and payables(a)
 
 
 
 
 
 
 
 
 
 
Gross derivative receivables
 
 
 
Gross derivative payables
 
 
March 31, 2016
(in millions)
Not designated as hedges
 
Designated as hedges
Total derivative receivables
 
Net derivative receivables(b)
 
Not designated as hedges
 
Designated
as hedges
Total derivative payables
 
Net derivative payables(b)
Trading assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
$
852,042

 
$
6,318

$
858,360

 
$
35,610

 
$
813,774

 
$
3,465

$
817,239

 
$
16,553

Credit
48,621

 
—

48,621

 
1,094

 
47,991

 
—

47,991

 
1,072

Foreign exchange
208,145

 
393

208,538

 
18,932

 
213,154

 
2,497

215,651

 
21,935

Equity
38,647

 
—

38,647

 
6,265

 
40,081

 
—

40,081

 
8,410

Commodity
21,860

 
230

22,090

 
8,308

 
25,060

 
107

25,167

 
11,349

Total fair value of trading assets and liabilities
$
1,169,315

 
$
6,941

$
1,176,256

 
$
70,209

 
$
1,140,060

 
$
6,069

$
1,146,129

 
$
59,319

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross derivative receivables
 
 
 
Gross derivative payables
 
 
December 31, 2015
(in millions)
Not designated as hedges
 
Designated as hedges
Total derivative receivables
 
Net derivative receivables(b)
 
Not designated as hedges
 
Designated
as hedges
Total derivative payables
 
Net derivative payables(b)
Trading assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
$
665,531

 
$
4,080

$
669,611

 
$
26,363

 
$
632,928

 
$
2,238

$
635,166

 
$
10,221

Credit
51,468

 
—

51,468

 
1,423

 
50,529

 
—

50,529

 
1,541

Foreign exchange
179,072

 
803

179,875

 
17,177

 
189,397

 
1,503

190,900

 
19,769

Equity
35,859

 
—

35,859

 
5,529

 
38,663

 
—

38,663

 
9,183

Commodity
23,713

 
1,352

25,065

 
9,185

 
27,653

 
1

27,654

 
12,076

Total fair value of trading assets and liabilities
$
955,643

 
$
6,235

$
961,878

 
$
59,677

 
$
939,170

 
$
3,742

$
942,912

 
$
52,790


(a)
Balances exclude structured notes for which the fair value option has been elected. See Note 4 for further information.
(b)
As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral receivables and payables when a legally enforceable master netting agreement exists.
Derivatives netting
The following tables present, as of March 31, 2016, and December 31, 2015, gross and net derivative receivables and payables by contract and settlement type. Derivative receivables and payables, as well as the related cash collateral from the same counterparty have been netted on the Consolidated balance sheets where the Firm has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, amounts are not eligible for netting on the Consolidated balance sheets, and those derivative receivables and payables are shown separately in the tables below.
In addition to the cash collateral received and transferred that is presented on a net basis with derivative receivables and payables, the Firm receives and transfers additional collateral (financial instruments and cash). These amounts mitigate counterparty credit risk associated with the Firm’s derivative instruments, but are not eligible for net presentation:
•
collateral that consists of non-cash financial instruments (generally U.S. government and agency securities and other Group of Seven Nations (“G7”) government bonds) and cash collateral held at third party custodians, which are shown separately as “Collateral not nettable on the Consolidated balance sheets” in the tables below, up to the fair value exposure amount.
•
the amount of collateral held or transferred that exceeds the fair value exposure at the individual counterparty level, as of the date presented, which is excluded from the tables below.
•
collateral held or transferred that relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement, which is excluded from the tables below.
 
March 31, 2016
 
December 31, 2015
(in millions)
Gross derivative receivables
Amounts netted on the Consolidated balance sheets
Net derivative receivables
 
Gross derivative receivables
 
Amounts netted
on the Consolidated balance sheets
Net derivative receivables
U.S. GAAP nettable derivative receivables
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
OTC
$
499,287

$
(470,211
)
 
$
29,076

 
$
417,386

 
$
(396,506
)
 
$
20,880

OTC–cleared
352,341

(352,283
)
 
58

 
246,750

 
(246,742
)
 
8

Exchange-traded(a)
280

(256
)
 
24

 
—

 
—

 
—

Total interest rate contracts
851,908

(822,750
)
 
29,158

 
664,136

 
(643,248
)
 
20,888

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
39,794

(39,294
)
 
500

 
44,082

 
(43,182
)
 
900

OTC–cleared
8,286

(8,233
)
 
53

 
6,866

 
(6,863
)
 
3

Total credit contracts
48,080

(47,527
)
 
553

 
50,948

 
(50,045
)
 
903

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
203,546

(189,295
)
 
14,251

 
175,060

 
(162,377
)
 
12,683

OTC–cleared
352

(285
)
 
67

 
323

 
(321
)
 
2

Exchange-traded(a)
165

(26
)
 
139

 
—

 
—

 
—

Total foreign exchange contracts
204,063

(189,606
)
 
14,457

 
175,383

 
(162,698
)
 
12,685

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
22,431

(21,450
)
 
981

 
20,690

 
(20,439
)
 
251

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
14,289

(10,932
)
 
3,357

 
12,285

 
(9,891
)
 
2,394

Total equity contracts
36,720

(32,382
)
 
4,338

 
32,975

 
(30,330
)
 
2,645

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
13,281

(5,717
)
 
7,564

 
15,001

 
(6,772
)
 
8,229

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
8,107

(8,065
)
 
42

 
9,199

 
(9,108
)
 
91

Total commodity contracts
21,388

(13,782
)
 
7,606

 
24,200

 
(15,880
)
 
8,320

Derivative receivables with appropriate legal opinion
$
1,162,159

$
(1,106,047
)
(b) 
$
56,112

 
$
947,642

 
$
(902,201
)
(b) 
$
45,441

Derivative receivables where an appropriate legal opinion has not been either sought or obtained
14,097

 
 
14,097

 
14,236

 
 
 
14,236

Total derivative receivables recognized on the Consolidated balance sheets
$
1,176,256

 
 
$
70,209

 
$
961,878

 
 
 
$
59,677

Collateral not nettable on the Consolidated balance sheets(c)(d)
 
 
 
$
(15,711
)
 
 
 
 
 
$
(13,543
)
Net amounts
 
 
 
$
54,498

 
 
 
 
 
$
46,134


 
March 31, 2016
 
December 31, 2015
(in millions)
Gross derivative payables
Amounts netted on the Consolidated balance sheets
Net derivative payables
 
Gross derivative payables
 
Amounts netted
on the Consolidated balance sheets
Net derivative payables
U.S. GAAP nettable derivative payables
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
OTC
$
470,034

$
(454,971
)
 
$
15,063

 
$
393,709

 
$
(384,576
)
 
$
9,133

OTC–cleared
345,794

(345,590
)
 
204

 
240,398

 
(240,369
)
 
29

Exchange-traded(a)
142

(125
)
 
17

 
—

 
—

 
—

Total interest rate contracts
815,970

(800,686
)
 
15,284

 
634,107

 
(624,945
)
 
9,162

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
40,214

(39,379
)
 
835

 
44,379

 
(43,019
)
 
1,360

OTC–cleared
7,540

(7,540
)
 
—

 
5,969

 
(5,969
)
 
—

Total credit contracts
47,754

(46,919
)
 
835

 
50,348

 
(48,988
)
 
1,360

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
208,692

(193,544
)
 
15,148

 
185,178

 
(170,830
)
 
14,348

OTC–cleared
162

(162
)
 
—

 
301

 
(301
)
 
—

Exchange-traded(a)
96

(10
)
 
86

 
—

 
—

 
—

Total foreign exchange contracts
208,950

(193,716
)
 
15,234

 
185,479

 
(171,131
)
 
14,348

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
24,328

(20,739
)
 
3,589

 
23,458

 
(19,589
)
 
3,869

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
12,202

(10,932
)
 
1,270

 
10,998

 
(9,891
)
 
1,107

Total equity contracts
36,530

(31,671
)
 
4,859

 
34,456

 
(29,480
)
 
4,976

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
15,319

(5,753
)
 
9,566

 
16,953

 
(6,256
)
 
10,697

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
8,352

(8,065
)
 
287

 
9,374

 
(9,322
)
 
52

Total commodity contracts
23,671

(13,818
)
 
9,853

 
26,327

 
(15,578
)
 
10,749

Derivative payables with appropriate legal opinions
$
1,132,875

$
(1,086,810
)
(b) 
$
46,065

 
$
930,717

 
$
(890,122
)
(b) 
$
40,595

Derivative payables where an appropriate legal opinion has not been either sought or obtained
13,254

 
 
13,254

 
12,195

 
 
 
12,195

Total derivative payables recognized on the Consolidated balance sheets
$
1,146,129

 
 
$
59,319

 
$
942,912

 
 
 
$
52,790

Collateral not nettable on the Consolidated balance sheets(c)(d)(e)
 
 
 
$
(10,501
)
 
 
 
 
 
$
(7,957
)
Net amounts
 
 
 
$
48,818

 
 
 
 
 
$
44,833

(a)
Exchange-traded derivative balances that relate to futures contracts are settled daily.
(b)
Net derivatives receivable included cash collateral netted of $84.5 billion and $73.7 billion at March 31, 2016, and December 31, 2015, respectively. Net derivatives payable included cash collateral netted of $65.3 billion and $61.6 billion related to OTC and OTC-cleared derivatives at March 31, 2016, and December 31, 2015, respectively.
(c)
Excludes all collateral related to derivative instruments where an appropriate legal opinion has not been either sought or obtained.
(d)
Represents liquid security collateral as well as cash collateral held at third party custodians related to derivative instruments where an appropriate legal opinion has been obtained. For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with that counterparty.
(e)
Derivative payables collateral relates only to OTC and OTC-cleared derivative instruments. Amounts exclude collateral transferred related to exchange-traded derivative instruments.
Liquidity risk and credit-related contingent features
For a more detailed discussion of liquidity risk and credit-related contingent features related to the Firm’s derivative contracts, see Note 6 of JPMorgan Chase’s 2015 Annual Report.
The following table shows the aggregate fair value of net derivative payables related to OTC and OTC-cleared derivatives that contain contingent collateral or termination features that may be triggered upon a ratings downgrade, and the associated collateral the Firm has posted in the normal course of business, at March 31, 2016, and December 31, 2015.
OTC and OTC-cleared derivative payables containing downgrade triggers
(in millions)
March 31, 2016
December 31, 2015
Aggregate fair value of net derivative payables
$
21,915

$
22,328

Collateral posted
18,635

18,942






The following table shows the impact of a single-notch and two-notch downgrade of the long-term issuer ratings of JPMorgan Chase & Co. and its subsidiaries, predominantly JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), at March 31, 2016, and December 31, 2015, related to OTC and OTC-cleared derivative contracts with contingent collateral or termination features that may be triggered upon a ratings downgrade. Derivatives contracts generally require additional collateral to be posted or terminations to be triggered when the predefined threshold rating is breached. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another major rating agency will generally not result in additional collateral, (except in certain instances in which additional initial margin may be required upon a ratings downgrade), nor in termination payments requirements. The liquidity impact in the table is calculated based upon a downgrade below the lowest current rating of the rating agencies referred to in the derivative contract.
Liquidity impact of downgrade triggers on OTC and OTC-cleared derivatives
 
 
 
 
 
March 31, 2016
 
December 31, 2015
(in millions)
Single-notch downgrade
Two-notch downgrade
 
Single-notch downgrade
Two-notch downgrade
Amount of additional collateral to be posted upon downgrade(a)
$
734

$
2,898

 
$
807

$
3,028

Amount required to settle contracts with termination triggers upon downgrade(b)
339

978

 
271

1,093

(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 12, 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 March 31, 2016 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 three months ended March 31, 2016 and 2015, respectively.
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended March 31, 2016
(in millions)
Derivatives
Hedged items
Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
1,378

$
(1,199
)
$
179

 
$
28

$
151

Foreign exchange(b)
(1,298
)
1,382

84

 
—

84

Commodity(c)
142

(138
)
4

 
(2
)
6

Total
$
222

$
45

$
267

 
$
26

$
241

 
 
 
 
 
 
 
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended March 31, 2015
(in millions)
Derivatives
Hedged items
Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
606

$
(248
)
$
358

 
$
17

$
341

Foreign exchange(b)
6,475

(6,459
)
16

 
—

16

Commodity(c)
322

(308
)
14

 
(6
)
20

Total
$
7,403

$
(7,015
)
$
388

 
$
11

$
377

(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.
(c)
Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or market (market approximates fair value). Gains and losses were recorded in principal transactions revenue.
(d)
Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the hedged item attributable to the hedged risk.
(e)
The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward points on foreign exchange forward contracts and time values.
Cash flow hedge gains and losses
The following tables present derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the pretax gains/(losses) recorded on such derivatives, for the three months ended March 31, 2016 and 2015, respectively. The Firm includes the gain/(loss) on the hedging derivative and the change in cash flows on the hedged item in the same line item in the Consolidated statements of income.
 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended March 31, 2016
(in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
(20
)
$
—

$
(20
)
$
(74
)
$
(54
)
Foreign exchange(b)
(35
)
—

(35
)
(93
)
(58
)
Total
$
(55
)
$
—

$
(55
)
$
(167
)
$
(112
)
 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended March 31, 2015
(in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
(149
)
$
—

$
(149
)
$
3

$
152

Foreign exchange(b)
(26
)
—

(26
)
(52
)
(26
)
Total
$
(175
)
$
—

$
(175
)
$
(49
)
$
126

(a)
Primarily consists of benchmark interest rate hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losses were recorded in net interest income, and for the forecasted transactions that the Firm determined during the three months ended March 31, 2015, were probable of not occurring, in other income.
(b)
Primarily consists of hedges of the foreign currency risk of non-U.S. dollar-denominated revenue and expense. The income statement classification of gains and losses follows the hedged item – primarily noninterest revenue and compensation expense.
(c)
Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk.
The Firm did not experience any forecasted transactions that failed to occur for the three months ended March 31, 2016. In the first quarter of 2015, the Firm reclassified approximately $150 million of net losses from accumulated other comprehensive income (“AOCI”) to other income because the Firm determined that it was probable that the forecasted interest payment cash flows would not occur as a result of the planned reduction in wholesale non-operating deposits.
Over the next 12 months, the Firm expects that approximately $130 million (after-tax) of net losses recorded in AOCI at March 31, 2016, related to cash flow hedges will be recognized in income. For terminated cash flow hedges, the maximum length of time over which forecasted transactions are remaining is approximately 7 years. For open cash flow hedges, the maximum length of time over which forecasted transactions are hedged is approximately 2 years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.
Net investment hedge gains and losses
The following table presents hedging instruments, by contract type, that were used in net investment hedge accounting relationships, and the pretax gains/(losses) recorded on such instruments for the three months ended March 31, 2016 and 2015.
 
Gains/(losses) recorded in income and
other comprehensive income/(loss)
 
2016
 
2015
Three months ended March 31, (in millions)
Excluded components recorded directly
in income(a)
Effective portion recorded in OCI
 
Excluded components
recorded directly
in income(a)
Effective portion recorded in OCI
Foreign exchange derivatives
 
$
(85
)
 
$
(590
)
 
 
$
(99
)
 
$
993

(a)
Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on foreign exchange forward contracts. Amounts related to excluded components are recorded in other income. The Firm measures the ineffectiveness of net investment hedge accounting relationships based on changes in spot foreign currency rates, and, therefore, there was no significant ineffectiveness for net investment hedge accounting relationships during the three months ended March 31, 2016 and 2015.
Gains and losses on derivatives used for specified risk management purposes
The following table presents pretax gains/(losses) recorded on a limited number of derivatives, not designated in hedge accounting relationships, that are used to manage risks associated with certain specified assets and liabilities, including certain risks arising from the mortgage pipeline, warehouse loans, MSRs, wholesale lending exposures, foreign currency-denominated assets and liabilities, and commodities-related contracts and investments.
 
Derivatives gains/(losses) recorded in income
 
Three months ended March 31,
(in millions)
2016
2015
Contract type
 
 
Interest rate(a)
$
983

$
683

Credit(b)
(61
)
(14
)
Foreign exchange(c)
(10
)
(12
)
Commodity(d)
—

(36
)
Total
$
912

$
621


(a)
Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in the mortgage pipeline, warehouse loans and MSRs, as well as written commitments to originate warehouse loans. Gains and losses were recorded predominantly in mortgage fees and related income.
(b)
Relates to credit derivatives used to mitigate credit risk associated with lending exposures in the Firm’s wholesale businesses. These derivatives do not include credit derivatives used to mitigate counterparty credit risk arising from derivative receivables, which is included in gains and losses on derivatives related to market-making activities and other derivatives. Gains and losses were recorded in principal transactions revenue.
(c)
Primarily relates to hedges of the foreign exchange risk of specified foreign currency-denominated assets and liabilities. Gains and losses were recorded in principal transactions revenue.
(d)
Primarily relates to commodity derivatives used to mitigate energy price risk associated with energy-related contracts and investments. Gains and losses were recorded in principal transactions revenue.

Gains and losses on derivatives related to market-making activities and other derivatives
The Firm makes markets in derivatives in order to meet the needs of customers and uses derivatives to manage certain risks associated with net open risk positions from the Firm’s market-making activities, including the counterparty credit risk arising from derivative receivables. All derivatives not included in the hedge accounting or specified risk management categories above are included in this category. Gains and losses on these derivatives are primarily recorded in principal transactions revenue. See Note 6 for information on principal transactions revenue.
Credit derivatives
For a more detailed discussion of credit derivatives, see Note 6 of JPMorgan Chase’s 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
March 31, 2016 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
Credit derivatives
 
 
 
 
 
 
Credit default swaps
$
(1,511,148
)
 
$
1,533,524

$
22,376

 
$
13,409

Other credit derivatives(a)
(31,541
)
 
27,455

(4,086
)
 
20,076

Total credit derivatives
(1,542,689
)
 
1,560,979

18,290

 
33,485

Credit-related notes
(36
)
 
—

(36
)
 
5,676

Total
$
(1,542,725
)
 
$
1,560,979

$
18,254

 
$
39,161

 
 
 
 
 
 
 
 
Maximum payout/Notional amount
December 31, 2015 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
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

(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 March 31, 2016, and December 31, 2015, 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
 
 
 
March 31, 2016
(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
$
(307,778
)
 
$
(736,344
)
 
$
(110,109
)
 
$
(1,154,231
)
 
$
12,619

 
$
(7,428
)
 
$
5,191

Noninvestment-grade
(113,014
)
 
(250,300
)
 
(25,180
)
 
(388,494
)
 
11,723

 
(15,693
)
 
(3,970
)
Total
$
(420,792
)
 
$
(986,644
)
 
$
(135,289
)
 
$
(1,542,725
)
 
$
24,342

 
$
(23,121
)
 
$
1,221

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
)

(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.