We use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. We designate certain derivatives as hedging instruments in qualifying hedge accounting relationships (fair value or cash flow hedges). Our remaining derivatives consist of economic hedges that do not qualify for hedge accounting, and derivatives held for customer accommodation trading or other purposes. For additional information on our derivative activities, see Note 18 (Derivatives) in our 2019 Form 10-K.

Table 15.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which interest and other payments are determined.

Table 15.1: Notional or Contractual Amounts and Fair Values of Derivatives


	September 30, 2020					December 31, 2019
	Notional or contractual amount				Fair value	Notional or contractual amount		Fair value
(in millions)			Derivative assets		Derivative liabilities		Derivative assets	Derivative liabilities
Derivatives designated as hedging instruments
Interest rate contracts	$	185,124	3,483		1,820	182,789	2,595	1,237

Foreign exchange contracts	38,477		587		616	32,386	341	1,170
Total derivatives designated as qualifying hedging instruments			4,070		2,436		2,936	2,407
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts	344,263		470		266	235,810	207	160
Equity contracts	23,624		1,724		209	19,263	1,126	224
Foreign exchange contracts	44,282		422		555	26,595	118	286
Credit contracts – protection purchased	81		32		—	1,400	27	—
Subtotal			2,648		1,030		1,478	670
Customer accommodation trading and other derivatives:
Interest rate contracts	10,657,433		37,949		28,936	11,117,542	21,245	17,969
Commodity contracts	73,086		2,344		2,446	79,737	1,421	1,770
Equity contracts	305,900		13,009		16,066	272,145	7,410	10,240
Foreign exchange contracts	347,499		4,880		4,717	364,469	4,755	4,791
Credit contracts – protection sold	16,067		11		48	12,215	12	65
Credit contracts – protection purchased	25,657		75		17	24,030	69	18

Subtotal			58,268		52,230		34,912	34,853
Total derivatives not designated as hedging instruments			60,916		53,260		36,390	35,523
Total derivatives before netting			64,986		55,696		39,326	37,930
Netting			(41,271)		(41,929)		(25,123)	(28,851)
Total			$	23,715	13,767		14,203	9,079

Table 15.2 provides information on the gross fair values of derivative assets and liabilities, the balance sheet netting adjustments and the resulting net fair value amount recorded on our balance sheet, as well as the non-cash collateral associated with such arrangements. We execute substantially all of our derivative transactions under master netting arrangements and reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis within the balance sheet. The “Gross amounts recognized” column in the following table includes $55.9 billion and $48.6 billion of gross derivative assets and liabilities, respectively, at September 30, 2020, and $33.7 billion and $33.5 billion, respectively, at December 31, 2019, with counterparties subject to enforceable master netting arrangements that are eligible for balance sheet netting adjustments. The majority of these amounts are interest rate contracts executed in over-the-counter (OTC) markets. The remaining gross derivative assets and liabilities of $9.1 billion and $7.1 billion, respectively, at September 30, 2020, and $5.6 billion and $4.4 billion, respectively, at December 31, 2019, include those with counterparties subject to master netting arrangements for which we have not assessed the enforceability because they are with counterparties where we do not currently have positions to offset, those subject to master netting arrangements where we have not been able to confirm the enforceability and those not subject to master netting arrangements. As such, we do not net derivative balances or collateral within the balance sheet for these counterparties. Cash collateral receivables and payables that have not been offset against our derivatives were $3.6 billion and $605 million, respectively, at September 30, 2020, and $6.3 billion and $1.4 billion, respectively, at December 31, 2019.

We determine the balance sheet netting adjustments based on the terms specified within each master netting arrangement. We disclose the balance sheet netting amounts within the column titled “Gross amounts offset in consolidated balance sheet.” Balance sheet netting adjustments are determined at the counterparty level for which there may be multiple contract types. For disclosure purposes, we allocate these netting adjustments to the contract type for each counterparty proportionally based upon the “Gross amounts recognized” by counterparty. As a result, the net amounts disclosed by contract type may not represent the actual exposure upon settlement of the contracts.

We do not net non-cash collateral that we receive and pledge on the balance sheet. For disclosure purposes, we present the fair value of this non-cash collateral in the column titled “Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)” within the table. We determine and allocate the Disclosure-only netting amounts in the same manner as balance sheet netting amounts.

The “Net amounts” column within Table 15.2 represents the aggregate of our net exposure to each counterparty after considering the balance sheet and Disclosure-only netting adjustments. We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty specific credit risk limits, using master netting arrangements and obtaining collateral. Derivative contracts executed in OTC markets include bilateral contractual arrangements that are not cleared through a central clearing organization but are typically subject to master netting arrangements. The proportion of these derivative contracts relative to our total derivative assets and liabilities are presented in the “Percent exchanged in over-the-counter market” column in Table 15.2. In addition to the netting amounts included in the table, we also have balance sheet netting related to resale and repurchase agreements that are disclosed within Note 13 (Guarantees, Pledged Assets and Collateral, and Other Commitments).

Table 15.2: Gross Fair Values of Derivative Assets and Liabilities


(in millions)	Gross amounts recognized		Gross amounts offset in consolidated balance sheet (1)	Net amounts in consolidated balance sheet	Gross amounts not offset in consolidated balance sheet (Disclosure-only netting)	Net amounts	Percent exchanged in over-the-counter market
September 30, 2020
Derivative assets
Interest rate contracts	$	41,902	(26,163)	15,739	(1,380)	14,359	97	%
Commodity contracts	2,344		(1,345)	999	(6)	993	80
Equity contracts	14,733		(9,390)	5,343	(794)	4,549	71
Foreign exchange contracts	5,889		(4,306)	1,583	(8)	1,575	100
Credit contracts – protection sold	11		(8)	3	—	3	73
Credit contracts – protection purchased	107		(59)	48	(2)	46	88

Total derivative assets	$	64,986	(41,271)	23,715	(2,190)	21,525
Derivative liabilities
Interest rate contracts	$	31,022	(27,112)	3,910	(2,039)	1,871	97	%
Commodity contracts	2,446		(1,225)	1,221	(6)	1,215	79
Equity contracts	16,275		(9,341)	6,934	(372)	6,562	73
Foreign exchange contracts	5,888		(4,206)	1,682	(624)	1,058	100
Credit contracts – protection sold	48		(40)	8	(5)	3	95
Credit contracts – protection purchased	17		(5)	12	—	12	85

Total derivative liabilities	$	55,696	(41,929)	13,767	(3,046)	10,721
December 31, 2019
Derivative assets
Interest rate contracts	$	24,047	(14,878)	9,169	(445)	8,724	95	%
Commodity contracts	1,421		(888)	533	(2)	531	80
Equity contracts	8,536		(5,570)	2,966	(69)	2,897	65
Foreign exchange contracts	5,214		(3,722)	1,492	(22)	1,470	100
Credit contracts – protection sold	12		(9)	3	—	3	84
Credit contracts – protection purchased	96		(56)	40	(1)	39	97

Total derivative assets	$	39,326	(25,123)	14,203	(539)	13,664
Derivative liabilities
Interest rate contracts	$	19,366	(16,595)	2,771	(545)	2,226	94	%
Commodity contracts	1,770		(677)	1,093	(2)	1,091	82
Equity contracts	10,464		(6,647)	3,817	(319)	3,498	81
Foreign exchange contracts	6,247		(4,866)	1,381	(169)	1,212	100
Credit contracts – protection sold	65		(60)	5	(3)	2	98
Credit contracts – protection purchased	18		(6)	12	—	12	93

Total derivative liabilities	$	37,930	(28,851)	9,079	(1,038)	8,041

(1)Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in the consolidated balance sheet, including related cash collateral and portfolio level counterparty valuation adjustments. Counterparty valuation adjustments related to derivative assets were $507 million and $231 million and debit valuation adjustments related to derivative liabilities were $236 million and $100 million at September 30, 2020, and December 31, 2019, respectively. Cash collateral totaled $6.4 billion and $7.3 billion, netted against derivative assets and liabilities, respectively, at September 30, 2020, and $2.9 billion and $6.8 billion, respectively, at December 31, 2019.

Fair Value and Cash Flow Hedges

For fair value hedges, we use interest rate swaps to convert certain of our fixed-rate long-term debt and time certificates of deposit to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt. In addition, we use interest rate swaps, cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge against changes in fair value of certain investments in available-for-sale debt securities due to changes in interest rates, foreign currency rates, or both. We also use interest rate swaps to hedge against changes in fair value for certain mortgage loans held for sale. For certain fair value hedges of foreign currency risk, changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the

assessment of hedge effectiveness and recorded in other comprehensive income. See Note 21 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.

For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain floating-rate commercial loans and paid on certain floating-rate debt due to changes in the contractually specified interest rate. We also use cross-currency swaps to hedge variability in interest payments on fixed-rate foreign currency-denominated long-term debt due to changes in foreign exchange rates.

We estimate $175 million pre-tax of deferred net losses related to cash flow hedges in OCI at September 30, 2020, will be reclassified into net interest income during the next twelve months. The deferred losses expected to be reclassified into net interest income are predominantly related to discontinued hedges of floating rate loans. For cash flow hedges as of

September 30, 2020, we are hedging our foreign currency exposure to the variability of future cash flows for all forecasted transactions for a maximum of 10 years. For additional information on our accounting hedges, see Note 1 (Summary of Significant Accounting Policies) and Note 18 (Derivatives) in our 2019 Form 10-K.

Table 15.3 and Table 15.4 show the net gains (losses) by income statement line item impacted, related to derivatives in fair value and cash flow hedging relationships, respectively.

Table 15.3: Gains (Losses) Recognized on Fair Value Hedging Relationships


	Net interest income					Noninterest income	Total recorded in net income	Total recorded in OCI
(in millions)	Debt securities		Mortgage loans held for sale	Deposits	Long-term debt		Other	Derivative gains (losses)	Derivative gains (losses)
Quarter ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	2,446	232	(314)	(1,038)		220	N/A	(18)

Interest contracts:
Amounts related to interest settlements on derivatives	(114)		—	157	542		—	585
Recognized on derivatives	280		1	(156)	(1,357)		—	(1,232)	—
Recognized on hedged items	(265)		(1)	156	1,269		—	1,159
Total gains (losses) (pre-tax) on interest rate contracts	(99)		—	157	454		—	512	—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	16		—	—	(5)		—	11
Recognized on derivatives	1		—	—	52		856	909	(82)
Recognized on hedged items	(1)		—	—	(5)		(849)	(855)
Total gains (losses) (pre-tax) on foreign exchange contracts	16		—	—	42		7	65	(82)
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(83)	—	157	496		7	577	(82)
Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	8,864	659	(2,641)	(3,515)		869	N/A	167

Interest contracts:
Amounts related to interest settlements on derivatives	(253)		—	379	1,144		—	1,270
Recognized on derivatives	(1,612)		(52)	288	8,967		—	7,591	—
Recognized on hedged items	1,654		53	(278)	(8,775)		—	(7,346)
Total gains (losses) (pre-tax) on interest rate contracts	(211)		1	389	1,336		—	1,515	—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	33		—	—	(136)		—	(103)
Recognized on derivatives	(1)		—	—	276		780	1,055	5
Recognized on hedged items	2		—	—	(249)		(769)	(1,016)
Total gains (losses) (pre-tax) on foreign exchange contracts	34		—	—	(109)		11	(64)	5
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(177)	1	389	1,227		11	1,451	5

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	Net interest income					Noninterest income	Total recorded in net income	Total recorded in OCI
(in millions)	Debt securities		Mortgage loans held for sale	Deposits	Long-term debt		Other	Derivative gains (losses)	Derivative gains (losses)
Quarter ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,666	232	(2,324)	(1,780)		1,842	N/A	85

Interest contracts:
Amounts related to interest settlements on derivatives	(1)		1	26	53		—	79
Recognized on derivatives	(628)		(3)	30	2,880		—	2,279	—
Recognized on hedged items	631		1	(30)	(2,809)		—	(2,207)
Total gains (losses) (pre-tax) on interest rate contracts	2		(1)	26	124		—	151	—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	9		—	—	(115)		—	(106)
Recognized on derivatives	(2)		—	—	86		(918)	(834)	28
Recognized on hedged items	3		—	—	(124)		899	778
Total gains (losses) (pre-tax) on foreign exchange contracts	10		—	—	(153)		(19)	(162)	28
Total gains (losses) (pre-tax) recognized on fair value hedges	$	12	(1)	26	(29)		(19)	(11)	28
Nine months ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	11,388	579	(6,563)	(5,607)		3,667	N/A	265

Interest contracts:
Amounts related to interest settlements on derivatives	29		1	(4)	53		—	79
Recognized on derivatives	(2,531)		(36)	588	7,813		—	5,834	—
Recognized on hedged items	2,544		32	(563)	(7,646)		—	(5,633)
Total gains (losses) (pre-tax) on interest rate contracts	42		(3)	21	220		—	280	—
Foreign exchange contracts:
Amounts related to interest settlements on derivatives	29		—	—	(385)		—	(356)
Recognized on derivatives	(11)		—	—	583		(994)	(422)	58
Recognized on hedged items	12		—	—	(576)		975	411
Total gains (losses) (pre-tax) on foreign exchange contracts	30		—	—	(378)		(19)	(367)	58
Total gains (losses) (pre-tax) recognized on fair value hedges	$	72	(3)	21	(158)		(19)	(87)	58

Table 15.4: Gains (Losses) Recognized on Cash Flow Hedging Relationships


	Net interest Income			Total recorded in net income	Total recorded in OCI
(in millions)	Loans		Long-term debt	Derivative gains (losses)	Derivative gains (losses)
Quarter ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	7,954	(1,038)	N/A	(18)
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(53)		2	(51)	51
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	—
Total gains (losses) (pre-tax) on interest rate contracts	(53)		2	(51)	51
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(1)	(1)	1
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	12
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(1)	(1)	13
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(53)	1	(52)	64
Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income and other comprehensive income	$	26,467	(3,515)	N/A	167
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(162)		3	(159)	159
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	—
Total gains (losses) (pre-tax) on interest rate contracts	(162)		3	(159)	159
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(6)	(6)	6
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(3)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(6)	(6)	3
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(162)	(3)	(165)	162
Quarter ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	10,982	(1,780)	N/A	85
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(73)		—	(73)	73
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	—
Total gains (losses) (pre-tax) on interest rate contracts	(73)		—	(73)	73
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(2)	(2)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(18)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(2)	(2)	(16)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(73)	(2)	(75)	57
Nine months ended September 30, 2019
Total amounts presented in the consolidated statement of income and other comprehensive income	$	33,652	(5,607)	N/A	265
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(228)		1	(227)	227
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	—
Total gains (losses) (pre-tax) on interest rate contracts	(228)		1	(227)	227
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		(6)	(6)	6
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	(26)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		(6)	(6)	(20)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(228)	(5)	(233)	207

Table 15.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge

accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.

Table 15.5: Hedged Items in Fair Value Hedging Relationship


	Hedged Items Currently Designated			Hedged Items No Longer Designated (1)
(in millions)	Carrying Amount of Assets/(Liabilities) (2)(4)		Hedge Accounting Basis Adjustment Assets/(Liabilities) (3)	Carrying Amount of Assets/(Liabilities) (4)	Hedge Accounting Basis Adjustment Assets/(Liabilities)
September 30, 2020
Available-for-sale debt securities (5)	$	25,969	2,109	9,435	301

Mortgage loans held for sale	173		5	—	—
Deposits	(29,852)		(604)	—	—
Long-term debt	(164,848)		(14,736)	(16,538)	60
December 31, 2019
Available-for-sale debt securities (5)	$	36,896	1,110	9,486	278

Mortgage loans held for sale	961		(12)	—	—
Deposits	(43,716)		(324)	—	—
Long-term debt	(127,423)		(5,827)	(25,750)	173

(1)Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.

(2)Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded $9.6 billion for debt securities and $(4.5) billion for long-term debt as of September 30, 2020, and $1.2 billion for debt securities and $(5.2) billion for long-term debt as of December 31, 2019.

(3)The balance includes $476 million and $138 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of September 30, 2020, and $790 million and $109 million of debt securities and long-term debt cumulative basis adjustments, respectively, as of December 31, 2019, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.

(4)Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.

(5)Carrying amount represents the amortized cost.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include economic hedges and derivatives entered into for customer accommodation trading purposes.

We use economic hedge derivatives to manage our exposure to interest rate risk, equity price risk, foreign currency risk, and credit risk. We also use economic hedge derivatives to mitigate the periodic earnings volatility caused by mismatches between the changes in fair value of the hedged item and hedging instrument recognized on our fair value accounting hedges. In second quarter 2020, we entered into arrangements to transition

the economic hedges of our deferred compensation plan liabilities from equity securities to derivative instruments. Changes in the fair values of derivatives used to economically hedge the deferred compensation plan are reported in personnel expense.

For additional information on economic hedges and other derivatives, see Note 18 (Derivatives) to Financial Statements in our 2019 Form 10-K.

Table 15.6 shows the net gains (losses) recognized by income statement lines, related to derivatives not designated as hedging instruments.

Table 15.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments


	Noninterest income						Noninterest Expense
(in millions)	Mortgage banking		Net gains (losses) from equity securities	Net gains (losses) from trading activities	Other	Total	Personnel expense
Quarter ended September 30, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	216	—	—	(27)	189	—
Equity contracts	—		(209)	—	(1)	(210)	(215)
Foreign exchange contracts	—		—	—	(523)	(523)	—
Credit contracts	—		—	—	(3)	(3)	—
Subtotal	216		(209)	—	(554)	(547)	(215)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	485		—	271	—	756	—
Commodity contracts	—		—	(356)	—	(356)	—
Equity contracts	—		—	(1,291)	(142)	(1,433)	—
Foreign exchange contracts	—		—	160	—	160	—
Credit contracts	—		—	(32)	—	(32)	—

Subtotal	485		—	(1,248)	(142)	(905)	—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	701	(209)	(1,248)	(696)	(1,452)	(215)
Nine months ended September 30, 2020
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,829	—	—	(72)	2,757	—
Equity contracts	—		(392)	—	(35)	(427)	(356)
Foreign exchange contracts	—		—	—	49	49	—
Credit contracts	—		—	—	14	14	—
Subtotal	2,829		(392)	—	(44)	2,393	(356)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	1,584		—	(1,516)	—	68	—
Commodity contracts	—		—	(468)	—	(468)	—
Equity contracts	—		—	1,110	(214)	896	—
Foreign exchange contracts	—		—	(242)	—	(242)	—
Credit contracts	—		—	115	—	115	—

Subtotal	1,584		—	(1,001)	(214)	369	—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	4,413	(392)	(1,001)	(258)	2,762	(356)

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	Noninterest income
(in millions)	Mortgage banking		Net gains (losses) from equity securities	Net gains (losses) from trading activities	Other	Total
Quarter ended September 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	736	—	—	—	736
Equity contracts	—		(1,375)	—	(6)	(1,381)
Foreign exchange contracts	—		—	—	263	263
Credit contracts	—		—	—	(11)	(11)
Subtotal	736		(1,375)	—	246	(393)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	95		—	(355)	—	(260)
Commodity contracts	—		—	65	—	65
Equity contracts	—		—	284	10	294
Foreign exchange contracts	—		—	78	—	78
Credit contracts	—		—	(10)	—	(10)

Subtotal	95		—	62	10	167
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	831	(1,375)	62	256	(226)
Nine months ended September 30, 2019
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	2,419	—	—	7	2,426
Equity contracts	—		(2,918)	—	(6)	(2,924)
Foreign exchange contracts	—		—	—	403	403
Credit contracts	—		—	—	(1)	(1)
Subtotal	2,419		(2,918)	—	403	(96)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	392		—	(861)	—	(469)
Commodity contracts	—		—	143	—	143
Equity contracts	—		—	(2,975)	(396)	(3,371)
Foreign exchange contracts	—		—	9	—	9
Credit contracts	—		—	(70)	—	(70)

Subtotal	392		—	(3,754)	(396)	(3,758)
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	2,811	(2,918)	(3,754)	7	(3,854)

(1)Mortgage banking amounts for the third quarter and first nine months of 2020 are comprised of gains of $513 million and $4.4 billion, respectively, related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $(297) million and $(1.6) billion, respectively, related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for the third quarter and first nine months of 2019 are comprised of gains of $678 million and $2.8 billion offset by gains (losses) of $58 million and $(376) million, respectively.

Credit Derivatives

Credit derivative contracts are arrangements whose value is derived from the transfer of credit risk of a reference asset or entity from one party (the purchaser of credit protection) to another party (the seller of credit protection). We use credit derivatives to assist customers with their risk management objectives. We may also use credit derivatives in structured product transactions or liquidity agreements written to special purpose vehicles. The maximum exposure of sold credit derivatives is managed through posted collateral, purchased credit derivatives and similar products in order to achieve our desired credit risk profile. This credit risk management provides

an ability to recover a significant portion of any amounts that would be paid under the sold credit derivatives. We would be

required to perform under sold credit derivatives in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment. In certain cases, other triggers may exist, such as the credit downgrade of the referenced obligors or the inability of the special purpose vehicle for which we have provided liquidity to obtain funding.

Table 15.7 provides details of sold and purchased credit derivatives.

Table 15.7: Sold and Purchased Credit Derivatives


				Notional amount
(in millions)	Fair value asset		Fair value liability	Protection sold (A)	Protection sold – non- investment grade	Protection purchased with identical underlyings (B)	Net protection sold (A) - (B)	Other protection purchased	Range of maturities
September 30, 2020
Credit default swaps on:
Corporate bonds	$	8	3	3,850	1,010	2,677	1,173	3,348	2020 - 2029
Structured products	—		6	22	22	20	2	92	2034 - 2047
Credit protection on:
Default swap index	1		—	5,250	1,239	2,125	3,125	4,762	2020 - 2029
Commercial mortgage-backed securities index	2		26	311	54	286	25	75	2047 - 2072
Asset-backed securities index	—		7	40	40	40	—	1	2045 - 2046
Other	—		6	6,594	6,426	—	6,594	12,312	2020 - 2040
Total credit derivatives	$	11	48	16,067	8,791	5,148	10,919	20,590
December 31, 2019
Credit default swaps on:
Corporate bonds	$	8	1	2,855	707	1,885	970	2,447	2020 - 2029
Structured products	—		25	74	69	63	11	111	2022 - 2047
Credit protection on:
Default swap index	1		—	2,542	120	550	1,992	8,105	2020 - 2029
Commercial mortgage-backed securities index	3		26	322	67	296	26	50	2047 - 2058
Asset-backed securities index	—		8	41	41	41	—	1	2045 - 2046
Other	—		5	6,381	5,738	—	6,381	11,881	2020 - 2049
Total credit derivatives	$	12	65	12,215	6,742	2,835	9,380	22,595

Protection sold represents the estimated maximum exposure to loss that would be incurred under an assumed hypothetical circumstance, where the value of our interests and any associated collateral declines to zero, without any consideration of recovery or offset from any economic hedges. We believe this hypothetical circumstance to be an extremely remote possibility and accordingly, this required disclosure is not an indication of expected loss. The amounts under non-investment grade represent the notional amounts of those credit derivatives on which we have a higher risk of being required to perform under the terms of the credit derivative and are a function of the underlying assets.

We consider the risk of performance to be high if the underlying assets under the credit derivative have an external rating that is below investment grade or an internal credit default grade that is equivalent thereto. We believe the net protection sold, which is representative of the net notional amount of protection sold and purchased with identical underlyings, in combination with other protection purchased, is more representative of our exposure to loss than either non-investment grade or protection sold. Other protection purchased represents additional protection, which may offset the exposure to loss for protection sold, that was not purchased with an identical underlying of the protection sold.

Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. Table 15.8 illustrates our exposure to such derivatives with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.

Table 15.8: Credit-Risk Contingent Features


(in billions)	Sep 30, 2020		Dec 31, 2019
Net derivative liabilities with credit-risk contingent features	$	14.9	10.4
Collateral posted	13.2		9.1
Additional collateral to be posted upon a below investment grade credit rating (1)	1.6		1.3

(1)Any credit rating below investment grade requires us to post the maximum amount of collateral.