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Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following table presents information about our assets and liabilities measured at fair value on a recurring basis at June 30, 2018 and December 31, 2017, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Unless otherwise noted below, assets and liabilities in the following table are recorded at fair value through net income.
 
Fair Value Measurements on a Recurring Basis
June 30, 2018
Level 1
 
Level 2
 
Level 3
 
Gross
Balance
 
Netting(8)
 
Net
Balance
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Securities purchased under agreements to resell(1)
$

 
$
395

 
$

 
$
395

 
$

 
$
395

Trading assets, excluding derivatives:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury, U.S. Government agencies and sponsored enterprises
4,732

 
142

 

 
4,874

 

 
4,874

Collateralized debt obligations

 

 
131

 
131

 

 
131

Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages

 
17

 

 
17

 

 
17

Student loans

 
92

 

 
92

 

 
92

Corporate and other domestic debt securities

 

 
1,803

 
1,803

 

 
1,803

Debt securities issued by foreign entities
5,674

 
210

 

 
5,884

 

 
5,884

Precious metals trading

 
9,212

 

 
9,212

 

 
9,212

Derivatives:(2)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
7

 
10,051

 

 
10,058

 

 
10,058

Foreign exchange contracts
1

 
18,274

 
1

 
18,276

 

 
18,276

Equity contracts

 
3,675

 
124

 
3,799

 

 
3,799

Precious metals contracts
104

 
732

 

 
836

 

 
836

Credit contracts

 
839

 
120

 
959

 

 
959

Other contracts(3)

 

 
8

 
8

 

 
8

Derivatives netting

 

 

 

 
(30,241
)
 
(30,241
)
Total derivatives
112

 
33,571

 
253

 
33,936

 
(30,241
)
 
3,695

Securities available-for-sale:(4)
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury, U.S. Government agencies and sponsored enterprises
17,154

 
11,331

 

 
28,485

 

 
28,485

Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Home equity

 
47

 

 
47

 

 
47

Other

 

 
107

 
107

 

 
107

Debt securities issued by foreign entities
2,132

 
257

 

 
2,389

 

 
2,389

Loans(1)

 
90

 

 
90

 

 
90

Other assets:
 
 
 
 
 
 
 
 
 
 
 
Equity securities(5)

 
190

 

 
190

 

 
190

Equity Securities measured at net asset value(5)(6)

 

 

 
93

 

 
93

Other(7)

 

 
12

 
12

 

 
12

Total assets
$
29,804

 
$
55,554

 
$
2,306

 
$
87,757

 
$
(30,241
)
 
$
57,516

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(1)
$

 
$
6,825

 
$
876

 
$
7,701

 
$

 
$
7,701

Trading liabilities, excluding derivatives
975

 
7

 

 
982

 

 
982

Derivatives:(2)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
132

 
11,170

 

 
11,302

 

 
11,302

Foreign exchange contracts

 
17,566

 
2

 
17,568

 

 
17,568

Equity contracts

 
2,988

 
122

 
3,110

 

 
3,110

Precious metals contracts
28

 
674

 

 
702

 

 
702

Credit contracts

 
800

 
10

 
810

 

 
810

Other contracts(3)

 

 
59

 
59

 

 
59

Derivatives netting

 

 

 

 
(31,253
)
 
(31,253
)
Total derivatives
160

 
33,198

 
193

 
33,551

 
(31,253
)
 
2,298

Short-term borrowings(1)

 
1,315

 

 
1,315

 

 
1,315

Long-term debt(1)

 
11,825

 
557

 
12,382

 

 
12,382

Total liabilities
$
1,135

 
$
53,170

 
$
1,626

 
$
55,931

 
$
(31,253
)
 
$
24,678

 
Fair Value Measurements on a Recurring Basis
December 31, 2017
Level 1
 
Level 2
 
Level 3
 
Gross
Balance
 
Netting(8)
 
Net
Balance
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
Securities purchased under agreements to resell(1)
$

 
$
80

 
$

 
$
80

 
$

 
$
80

Trading assets, excluding derivatives:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury, U.S. Government agencies and sponsored enterprises
3,391

 
332

 

 
3,723

 

 
3,723

Collateralized debt obligations

 

 
129

 
129

 

 
129

Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages

 
16

 

 
16

 

 
16

Student loans

 
91

 

 
91

 

 
91

Corporate and other domestic debt securities

 

 
1,803

 
1,803

 

 
1,803

Debt securities issued by foreign entities
4,167

 
210

 

 
4,377

 

 
4,377

Equity securities(5)

 
12

 

 
12

 

 
12

Precious metals trading

 
2,274

 

 
2,274

 

 
2,274

Derivatives:(2)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
6

 
24,231

 

 
24,237

 

 
24,237

Foreign exchange contracts
4

 
15,754

 
2

 
15,760

 

 
15,760

Equity contracts

 
3,911

 
173

 
4,084

 

 
4,084

Precious metals contracts
52

 
502

 

 
554

 

 
554

Credit contracts

 
536

 
120

 
656

 

 
656

Other contracts(3)

 

 
6

 
6

 

 
6

Derivatives netting

 

 

 

 
(40,874
)
 
(40,874
)
Total derivatives
62

 
44,934

 
301

 
45,297

 
(40,874
)
 
4,423

Securities available-for-sale:(4)
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury, U.S. Government agencies and sponsored enterprises
19,056

 
10,004

 

 
29,060

 

 
29,060

Asset-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Home equity

 
51

 

 
51

 

 
51

Other

 
399

 
111

 
510

 

 
510

Debt securities issued by foreign entities
850

 
52

 

 
902

 

 
902

Equity securities(5)

 
177

 

 
177

 

 
177

Loans(1)

 
471

 

 
471

 

 
471

Other assets(7)

 

 
15

 
15

 

 
15

Total assets
$
27,526

 
$
59,103

 
$
2,359

 
$
88,988

 
$
(40,874
)
 
$
48,114

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(1)
$

 
$
6,796

 
$
897

 
$
7,693

 
$

 
$
7,693

Trading liabilities, excluding derivatives
1,722

 
524

 

 
2,246

 

 
2,246

Derivatives:(2)
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
59

 
24,379

 

 
24,438

 

 
24,438

Foreign exchange contracts

 
14,664

 
2

 
14,666

 

 
14,666

Equity contracts

 
2,859

 
92

 
2,951

 

 
2,951

Precious metals contracts
108

 
614

 

 
722

 

 
722

Credit contracts

 
578

 
6

 
584

 

 
584

Other contracts(3)

 

 
52

 
52

 

 
52

Derivatives netting

 

 

 

 
(40,217
)
 
(40,217
)
Total derivatives
167

 
43,094

 
152

 
43,413

 
(40,217
)
 
3,196

Short-term borrowings(1)

 
2,032

 

 
2,032

 

 
2,032

Long-term debt(1)

 
12,245

 
641

 
12,886

 

 
12,886

Total liabilities
$
1,889

 
$
64,691

 
$
1,690

 
$
68,270

 
$
(40,217
)
 
$
28,053

 

(1) 
See Note 10, "Fair Value Option," for additional information. Excluding the fair value movement on fair value option liabilities attributable to our own credit spread, which is recorded in other comprehensive income (loss), fair value option assets and liabilities are recorded at fair value through net income.
(2) 
Includes trading derivative assets of $3,546 million and $3,725 million and trading derivative liabilities of $2,295 million and $2,633 million at June 30, 2018 and December 31, 2017, respectively, as well as derivatives held for hedging and commitments accounted for as derivatives. See Note 9, "Derivatives," for additional information. Excluding changes in fair value of a derivative instrument associated with the effective portion of a qualifying cash flow hedge, which is recognized initially in other comprehensive income (loss), derivative assets and liabilities are recorded at fair value through net income.
(3) 
Consists of swap agreements entered into in conjunction with the sales of certain Visa Class B Shares.
(4) 
Securities available-for-sale are recorded at fair value through other comprehensive income (loss).
(5) 
See Note 3, "Securities," and Note 21, "New Accounting Pronouncements," for additional information. Beginning January 1, 2018, all equity investments are being recorded together as a component of other assets.
(6) 
Investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.
(7) 
Represents contingent consideration receivable associated with the sale of a portion of our Private Banking business.
(8) 
Represents counterparty and cash collateral netting which allow the offsetting of amounts relating to certain contracts if certain conditions are met.
Changes in Fair Value of Level 3 Assets and Liabilities
The following table summarizes additional information about changes in the fair value of Level 3 assets and liabilities during the three and six months ended June 30, 2018 and 2017. As a risk management practice, we may risk manage the Level 3 assets and liabilities, in whole or in part, using securities and derivative positions that are classified as Level 1 or Level 2 measurements within the fair value hierarchy. Since those Level 1 and Level 2 risk management positions are not included in the table below, the information provided does not reflect the effect of such risk management activities related to the Level 3 assets and liabilities.
 
Apr. 1,
2018
 
Total Realized / Unrealized Gains
(Losses) Included in
 
Purch-
ases
 
Issu-
ances
 
Settle-
ments
 
Transfers
Into
Level 3
 
Transfers
Out of
Level 3
 
Jun. 30,
2018
 
Current
Period
Unrealized
Gains
(Losses)
 
Earnings
 
Other Compre-hensive Income (Loss)
 
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivatives:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations
$
131

 
$
1

 
$

 
$

 
$

 
$
(1
)
 
$

 
$

 
$
131

 
$
1

Corporate and other domestic debt securities
1,803

 

 

 

 

 

 

 

 
1,803

 

Derivatives, net:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts

 
(1
)
 

 

 

 

 

 

 
(1
)
 
(1
)
Equity contracts
27

 
(10
)
 

 

 

 
(16
)
 
(1
)
 
2

 
2

 
(7
)
Credit contracts
113

 
1

 

 

 

 
(4
)
 

 

 
110

 
(3
)
Other contracts(3)
(44
)
 
(12
)
 

 

 

 
5

 

 

 
(51
)
 

Other asset-backed securities available-for-sale(4)
107

 

 

 

 

 

 

 

 
107

 

Other assets(5)
15

 
(3
)
 

 

 

 

 

 

 
12

 

Total assets
$
2,152

 
$
(24
)
 
$

 
$

 
$

 
$
(16
)
 
$
(1
)
 
$
2

 
$
2,113

 
$
(10
)
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(6)
$
(916
)
 
$
2

 
$
5

 
$

 
$
(88
)
 
$
38

 
$
(10
)
 
$
93

 
$
(876
)
 
$
8

Long-term debt(6)
(630
)
 
(5
)
 
1

 

 
(28
)
 
74

 

 
31

 
(557
)
 
1

Total liabilities
$
(1,546
)
 
$
(3
)
 
$
6

 
$

 
$
(116
)
 
$
112

 
$
(10
)
 
$
124

 
$
(1,433
)
 
$
9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jan. 1,
2018
 
Total Realized / Unrealized Gains
(Losses) Included in
 
Purch-
ases
 
Issu-
ances
 
Settle-
ments
 
Transfers
Into
Level 3
 
Transfers
Out of
Level 3
 
Jun. 30,
2018
 
Current
Period
Unrealized
Gains
(Losses)
 
Earnings
 
Other Compre-hensive Income (Loss)
 
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivatives:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations
$
129

 
$
8

 
$

 
$

 
$

 
$
(6
)
 
$

 
$

 
$
131

 
$
8

Corporate and other domestic debt securities
1,803

 

 

 

 

 

 

 

 
1,803

 

Derivatives, net:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts

 
(1
)
 

 

 

 

 

 

 
(1
)
 
(1
)
Equity contracts
81

 
(50
)
 

 

 

 
(30
)
 
(1
)
 
2

 
2

 
(45
)
Credit contracts
114

 
2

 

 

 

 
(6
)
 

 

 
110

 
(4
)
Other contracts(3)
(46
)
 
(14
)
 

 

 

 
9

 

 

 
(51
)
 

Other asset-backed securities available-for-sale(4)
111

 

 
(4
)
 

 

 

 

 

 
107

 
(4
)
Other assets(5)
15

 
(3
)
 

 

 

 

 

 

 
12

 

Total assets
$
2,207

 
$
(58
)
 
$
(4
)
 
$

 
$

 
$
(33
)
 
$
(1
)
 
$
2

 
$
2,113

 
$
(46
)
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(6)
$
(897
)
 
$
23

 
$
3

 
$

 
$
(179
)
 
$
60

 
$
(13
)
 
$
127

 
$
(876
)
 
$
25

Long-term debt(6)
(641
)
 
6

 
5

 

 
(143
)
 
141

 

 
75

 
(557
)
 
18

Total liabilities
$
(1,538
)
 
$
29

 
$
8

 
$

 
$
(322
)
 
$
201

 
$
(13
)
 
$
202

 
$
(1,433
)
 
$
43

 
Apr. 1,
2017
 
Total Realized / Unrealized Gains
(Losses) Included in
 
Purch-
ases
 
Issu-
ances
 
Settle-
ments
 
Transfers
Into
Level 3
 
Transfers
Out of
Level 3
 
Jun. 30,
2017
 
Current
Period
Unrealized
Gains
(Losses)
 
Earnings
 
Other Compre-hensive Income (Loss)
 
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivatives:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations
$
184

 
$
15

 
$

 
$

 
$

 
$
(68
)
 
$

 
$

 
$
131

 
$
4

Corporate and other domestic debt securities
2,884

 

 

 

 

 
(1,081
)
 

 

 
1,803

 

Derivatives, net:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts

 

 

 

 

 

 

 

 

 

Foreign exchange contracts

 

 

 

 

 

 

 

 

 

Equity contracts
21

 
12

 

 

 

 
(4
)
 

 
3

 
32

 
11

Credit contracts
181

 
1

 

 

 

 
(39
)
 

 

 
143

 
(4
)
Other contracts(3)
(26
)
 

 

 

 
(18
)
 

 

 

 
(44
)
 

Other asset-backed securities available-for-sale(4)
107

 

 

 

 

 

 

 

 
107

 
1

Total assets
$
3,351

 
$
28

 
$

 
$

 
$
(18
)
 
$
(1,192
)
 
$

 
$
3

 
$
2,172

 
$
12

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(6)
$
(1,216
)
 
$
(9
)
 
$
7

 
$

 
$
(48
)
 
$
86

 
$
(18
)
 
$
56

 
$
(1,142
)
 
$

Long-term debt(6)
(558
)
 
(14
)
 
(1
)
 

 
(37
)
 
62

 

 
7

 
(541
)
 
(12
)
Total liabilities
$
(1,774
)
 
$
(23
)
 
$
6

 
$

 
$
(85
)
 
$
148

 
$
(18
)
 
$
63

 
$
(1,683
)
 
$
(12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jan. 1,
2017
 
Total Realized / Unrealized Gains
(Losses) Included in
 
Purch-
ases
 
Issu-
ances
 
Settle-
ments
 
Transfers
Into
Level 3
 
Transfers
Out of
Level 3
 
Jun. 30,
2017
 
Current
Period
Unrealized
Gains
(Losses)
 
Earnings
 
Other Compre-hensive Income (Loss)
 
 
(in millions)
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivatives:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Collateralized debt obligations
$
184

 
$
18

 
$

 
$

 
$

 
$
(71
)
 
$

 
$

 
$
131

 
$
5

Corporate and other domestic debt securities
2,884

 

 

 

 

 
(1,081
)
 

 

 
1,803

 

Derivatives, net:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
1

 
(1
)
 

 

 

 

 

 

 

 
(1
)
Foreign exchange contracts

 

 

 

 

 

 

 

 

 

Equity contracts
(2
)
 
39

 

 

 

 
(8
)
 

 
3

 
32

 
32

Credit contracts
193

 
(4
)
 

 

 

 
(46
)
 

 

 
143

 
(14
)
Other contracts(3)
(9
)
 

 

 

 
(35
)
 

 

 

 
(44
)
 

Other asset-backed securities available-for-sale(4)
105

 
2

 

 

 

 

 

 

 
107

 
2

Total assets
$
3,356

 
$
54

 
$

 
$

 
$
(35
)
 
$
(1,206
)
 
$

 
$
3

 
$
2,172

 
$
24

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Domestic deposits(6)
$
(1,407
)
 
$
(14
)
 
$
12

 
$

 
$
(91
)
 
$
277

 
$
(21
)
 
$
102

 
$
(1,142
)
 
$
(4
)
Long-term debt(6)
(499
)
 
(40
)
 
(6
)
 

 
(122
)
 
78

 
(2
)
 
50

 
(541
)
 
(37
)
Total liabilities
$
(1,906
)
 
$
(54
)
 
$
6

 
$

 
$
(213
)
 
$
355

 
$
(23
)
 
$
152

 
$
(1,683
)
 
$
(41
)
 
(1) 
Gains (losses) on trading assets, excluding derivatives are included in trading revenue in the consolidated statement of income.
(2) 
Level 3 net derivatives included derivative assets of $253 million and derivative liabilities of $193 million at June 30, 2018 and derivative assets of $301 million and derivative liabilities of $170 million at June 30, 2017. Gains (losses) on derivatives, net are predominantly included in trading revenue in the consolidated statement of income.
(3) 
Consists of swap agreements entered into in conjunction with the sales of certain Visa Class B Shares.
(4) 
Realized gains (losses) on securities available-for-sale are included in other securities gains, net in the consolidated statement of income. Unrealized gains (losses) on securities available-for-sale are included in other comprehensive income (loss).
(5) 
Represents contingent consideration receivable associated with the sale of a portion of our Private Banking business. Gains (losses) associated with this transaction are included in other income in the consolidated statement of income.
(6) 
Excluding unrealized gains (losses) on fair value option liabilities attributable to our own credit spread, which are recorded in other comprehensive income (loss), gains (losses) on fair value option liabilities are included in gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income.
Quantitative Information about Recurring Fair Value Measurement of Assets and Liabilities Classified as Level 3
The following table presents quantitative information about the unobservable inputs used to determine the recurring fair value measurement of assets and liabilities classified as Level 3 fair value measurements at June 30, 2018 and December 31, 2017:
June 30, 2018
Financial Instrument Type
 
Fair Value (in millions)
 
Valuation Technique(s)
 
Significant Unobservable Inputs
 
Range of Inputs
Collateralized debt obligations
 
$
131

 
Broker quotes or consensus pricing and, where applicable, discounted cash flows
 
Prepayment rates
 
0%
 
 
 
 
 
 
Conditional default rates
 
0% - 1%
 
 
 
 
 
 
Loss severity rates
 
90% - 95%
Corporate and other domestic debt securities
 
$
1,803

 
Discounted cash flows
 
Spread volatility on collateral assets
 
2% - 4%
 
 
 
 
 
 
Correlation between insurance claim shortfall and collateral value
 
80%
Foreign exchange derivative contracts(1)
 
$
(1
)
 
Option pricing model
 
Implied volatility of currency pairs
 
9% - 11%
Equity derivative contracts(1)
 
$
2

 
Option pricing model
 
Equity / Equity Index volatility
 
7% - 35%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
44% - 79%
 
 
 
 
 
 
Equity dividend yields
 
0% - 14%
Credit derivative contracts
 
110

 
Option pricing model and, where applicable, discounted cash flows
 
Credit default swap spreads
 
95bps - 115bps
Other derivative contracts
 
$
(51
)
 
Discounted cash flows
 
Conversion rate
 
1.6 times
 
 
 
 
 
 
Expected duration
 
2 - 4 years
Other asset-backed securities available-for-sale
 
$
107

 
Discounted cash flows
 
Market assumptions related to yields for comparable instruments
 
1% - 3%
Other assets
 
$
12

 
Discounted cash flows
 
Client transfer rates based on rating
 
50% - 95%
Domestic deposits
(structured deposits)(1)(2)
 
$
(876
)
 
Option adjusted discounted cash flows
 
Implied volatility of currency pairs
 
9% - 11%
 
 
 
 
 
 
Equity / Equity Index volatility
 
7% - 30%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
44% - 51%
Long-term debt (structured notes)(1)(2)
 
$
(557
)
 
Option adjusted discounted cash flows
 
Implied volatility of currency pairs
 
9% - 11%
 
 
 
 
 
 
Equity / Equity Index volatility
 
7% - 30%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
44% - 79%

 
December 31, 2017
Financial Instrument Type
 
Fair Value (in millions)
 
Valuation Technique(s)
 
Significant Unobservable Inputs
 
Range of Inputs
Collateralized debt obligations
 
$
129

 
Broker quotes or consensus pricing and, where applicable, discounted cash flows
 
Prepayment rates
 
0% - 6%
 
 
 
 
 
 
Conditional default rates
 
4% - 6%
 
 
 
 
 
 
Loss severity rates
 
55% - 60%
Corporate and other domestic debt securities
 
$
1,803

 
Discounted cash flows
 
Spread volatility on collateral assets
 
2% - 4%
 
 
 
 
 
 
Correlation between insurance claim shortfall and collateral value
 
80%
Interest rate derivative contracts
 
$

 
Market comparable adjusted for probability to fund
 
Probability to fund for rate lock commitments
 
41% - 100%
Foreign exchange derivative contracts(1)
 
$

 
Option pricing model
 
Implied volatility of currency pairs
 
6% - 9%
Equity derivative contracts(1)
 
$
81

 
Option pricing model
 
Equity / Equity Index volatility
 
7% - 42%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
42% - 80%
 
 
 
 
 
 
Equity dividend yields
 
0% - 8%
Credit derivative contracts
 
$
114

 
Option pricing model and, where applicable, discounted cash flows
 
Issuer by issuer correlation of defaults
 
82% - 83%
 
 
 
 
 
 
Credit default swap spreads
 
154bps - 174bps
Other derivative contracts
 
$
(46
)
 
Discounted cash flows
 
Conversion rate
 
1.6 times
 
 
 
 
 
 
Expected duration
 
2 - 4 years
Other asset-backed securities available-for-sale
 
$
111

 
Discounted cash flows
 
Market assumptions related to yields for comparable instruments
 
1% - 3%
Other assets
 
$
15

 
Discounted cash flows
 
Client transfer rates based on rating
 
50% - 95%
Domestic deposits
(structured deposits)(1)(2)
 
$
(897
)
 
Option adjusted discounted cash flows
 
Implied volatility of currency pairs
 
6% - 9%
 
 
 
 
 
 
Equity / Equity Index volatility
 
7% - 42%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
42% - 80%
Long-term debt (structured notes)(1)(2)
 
$
(641
)
 
Option adjusted discounted cash flows
 
Implied volatility of currency pairs
 
6% - 9%
 
 
 
 
 
 
Equity / Equity Index volatility
 
7% - 42%
 
 
 
 
 
 
Equity / Equity and Equity / Index correlation
 
42% - 80%
 
(1) 
We are the client-facing entity and we enter into identical but opposite derivatives to transfer the resultant risks to our affiliates. With the exception of counterparty credit risks, we are market neutral. The corresponding intra-group derivatives are presented as equity derivatives and foreign exchange derivatives in the table.
(2) 
Structured deposits and structured notes contain embedded derivative features whose fair value measurements contain significant Level 3 inputs.
Assets and Liabilities Recorded at Fair Value on a Non Recurring Basis
The following table presents the fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded at June 30, 2018 and December 31, 2017. The gains (losses) during the three and six months ended June 30, 2018 and 2017 are also included.
 
Non-Recurring Fair Value Measurements
at June 30, 2018
 
Total Gains (Losses)
For the Three Months Ended June 30, 2018
 
Total Gains (Losses)
For the Six Months Ended
June 30, 2018
  
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Residential mortgage loans held for sale(1)
$

 
$

 
$
2

 
$
2

 
$

 
$

Consumer loans(2)

 
9

 

 
9

 
(1
)
 
(2
)
Commercial loans held for sale(3)

 
35

 

 
35

 

 
3

Impaired commercial loans(4)

 

 
155

 
155

 
46

 
101

Real estate owned(5)

 
8

 

 
8

 
1

 
2

Total assets at fair value on a non-recurring basis
$

 
$
52

 
$
157

 
$
209

 
$
46

 
$
104

 
Non-Recurring Fair Value Measurements
at December 31, 2017
 
Total Gains (Losses)
For the Three Months Ended June 30, 2017
 
Total Gains (Losses)
For the Six Months Ended
June 30, 2017
  
Level 1
 
Level 2
 
Level 3
 
Total
 
(in millions)
Residential mortgage loans held for sale(1)
$

 
$

 
$
2

 
$
2

 
$
3

 
$
7

Consumer loans(2)

 
21

 

 
21

 
(4
)
 
(8
)
Commercial loans held for sale(3)

 
62

 

 
62

 
1

 

Impaired commercial loans(4)

 

 
289

 
289

 
(15
)
 
49

Real estate owned(5)

 
6

 

 
6

 
2

 
4

Total assets at fair value on a non-recurring basis
$

 
$
89

 
$
291

 
$
380

 
$
(13
)
 
$
52

 
(1) 
At June 30, 2018 and December 31, 2017, the fair value of the loans held for sale was below cost. Certain residential mortgage loans held for sale have been classified as Level 3 fair value measurements within the fair value hierarchy as the underlying real estate properties used to determine fair value are illiquid assets as a result of market conditions. Additionally, the fair value of these properties is affected by, among other things, the location, the payment history and the completeness of the loan documentation.
(2) 
Represents residential mortgage loans held for investment whose carrying amount was reduced during the periods presented based on the fair value of the underlying collateral.
(3) 
At June 30, 2018 and December 31, 2017, the fair value of the loans held for sale was below cost.
(4) 
Certain commercial loans have undergone troubled debt restructurings and are considered impaired. As a matter of practical expedient, we measure the credit impairment of a collateral-dependent loan based on the fair value of the collateral asset. The collateral often involves real estate properties that are illiquid due to market conditions. As a result, these loans are classified as a Level 3 fair value measurement within the fair value hierarchy.
(5) 
Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value unadjusted for transaction costs.
Quantitative Information about Non Recurring Fair Value Measurement of Assets and Liabilities
The following tables present quantitative information about non-recurring fair value measurements of assets and liabilities classified with Level 3 of the fair value hierarchy at June 30, 2018 and December 31, 2017:
At June 30, 2018
 
 
 
 
 
 
 
 
Financial Instrument Type
 
Fair Value (in millions)
 
Valuation Technique(s)
 
Significant Unobservable Inputs
 
Range of Inputs
Residential mortgage loans held for sale
 
$
2

 
Third party appraisal valuation based on estimated loss severities, including collateral values
 
Loss severity rates
 
30% - 100%
Impaired commercial loans
 
155

 
Valuation of third party appraisal
on underlying collateral
 
Loss severity rates
 
0% - 57%
At December 31, 2017
Financial Instrument Type
 
Fair Value (in millions)
 
Valuation Technique(s)
 
Significant Unobservable Inputs
 
Range of Inputs
Residential mortgage loans held for sale
 
$
2

 
Third party appraisal valuation based on estimated loss severities, including collateral values
 
Loss severity rates
 
30% - 100%
Impaired commercial loans
 
289

 
Valuation of third party appraisal
on underlying collateral
 
Loss severity rates
 
9% - 61%
Additional Information Relating to Asset-Backed Securities and Collateralized Debt Obligations
The following tables provide additional information relating to asset-backed securities as well as certain collateralized debt obligations held at June 30, 2018:
Trading asset-backed securities:
Rating of Securities:(1)
Collateral Type:
Level 2
 
Level 3
 
Total
 
 
(in millions)
AAA - A
Student loans
$
92

 
$

 
$
92

BBB - B
Collateralized debt obligations

 
131

 
131

CCC - Unrated
Residential mortgages - Subprime
17

 

 
17

 
 
$
109

 
$
131

 
$
240

Available-for-sale securities backed by collateral:
Rating of Securities:(1)
Collateral Type:
Level 2
 
Level 3
 
Total
 
 
(in millions)
AAA - A
Home equity - Alt A
$
47

 
$

 
$
47

 
Other

 
49

 
49

 
Total AAA -A
$
47

 
$
49

 
$
96

BBB -B
Other

 
58

 
58

 
 
$
47

 
$
107

 
$
154

 
(1)  
We utilize Standard and Poor's ("S&P") as the primary source of credit ratings in the tables above. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Ratings for collateralized debt obligations represent the ratings associated with the underlying collateral.
Carrying Value and Estimated Fair Value of Financial Instruments
The following table summarizes the carrying value and estimated fair value of our financial instruments, excluding financial instruments that are carried at fair value on a recurring basis, at June 30, 2018 and December 31, 2017 and their classification within the fair value hierarchy:
June 30, 2018
Carrying
Value
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Financial assets:
 
 
 
 
 
 
 
 
 
Short-term financial assets
$
23,444

 
$
23,444

 
$
1,340

 
$
22,078

 
$
26

Federal funds sold and securities purchased under agreements to resell
9,781

 
9,781

 

 
9,781

 

Securities held-to-maturity
15,152

 
14,805

 

 
14,805

 

Commercial loans, net of allowance for credit losses
46,386

 
48,041

 

 

 
48,041

Commercial loans held for sale
36

 
36

 

 
36

 

Consumer loans, net of allowance for credit losses
19,482

 
18,661

 

 

 
18,661

Consumer loans held for sale:
 
 
 
 
 
 
 
 
 
Residential mortgages
31

 
31

 

 
30

 
1

Other consumer
56

 
56

 

 

 
56

Financial liabilities:
 
 
 
 
 
 
 
 
 
Short-term financial liabilities
$
5,101

 
$
5,103

 
$

 
$
5,077

 
$
26

Deposits:
 
 
 
 
 
 
 
 
 
Without fixed maturities
95,321

 
95,321

 

 
95,321

 

Fixed maturities
11,202

 
11,153

 

 
11,153

 

Deposits held for sale
130

 
130

 

 
130

 

Long-term debt
19,367

 
19,676

 

 
19,676

 

December 31, 2017
Carrying
Value
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
(in millions)
Financial assets:
 
 
 
 
 
 
 
 
 
Short-term financial assets
$
12,304

 
$
12,304

 
$
1,115

 
$
11,157

 
$
32

Federal funds sold and securities purchased under agreements to resell
32,538

 
32,538

 

 
32,538

 

Securities held-to-maturity
13,977

 
13,902

 

 
13,902

 

Commercial loans, net of allowance for credit losses
52,427

 
54,210

 

 

 
54,210

Commercial loans held for sale
177

 
177

 

 
177

 

Consumer loans, net of allowance for credit losses
19,455

 
18,598

 

 

 
18,598

Consumer loans held for sale:
 
 
 
 
 
 
 
 
 
Residential mortgages
6

 
6

 

 
5

 
1

Other consumer
61

 
61

 

 

 
61

Financial liabilities:
 
 
 
 
 
 
 
 
 
Short-term financial liabilities
$
2,650

 
$
2,667

 
$

 
$
2,635

 
$
32

Deposits:
 
 
 
 
 
 
 
 
 
Without fixed maturities
100,502

 
100,502

 

 
100,502

 

Fixed maturities
9,834

 
9,782

 

 
9,782

 

Deposits held for sale
673

 
673

 

 
673

 

Long-term debt
22,080

 
22,717

 

 
22,717