We use derivative instruments primarily to manage exposures to foreign currency exchange rate, interest rate, and equity price risks. Our primary objective in holding derivatives is to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates, interest rates, and equity prices. Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions and requiring collateral in certain cases. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of defaults by counterparties.

The fair values of our derivative instruments and the line items on the Consolidated Balance Sheets to which they were recorded are summarized as follows (in millions):


	DERIVATIVE ASSETS					DERIVATIVE LIABILITIES
	Balance Sheet Line Item	October 30, 2021		July 31, 2021		Balance Sheet Line Item	October 30, 2021		July 31, 2021
Derivatives designated as hedging instruments:
Foreign currency derivatives	Other current assets	$	21	$	14	Other current liabilities	$	7	$	3
Foreign currency derivatives	Other assets	4		1		Other long-term liabilities	—		—
Interest rate derivatives	Other current assets	6		9		Other current liabilities	—		—
Interest rate derivatives	Other assets	75		99		Other long-term liabilities	—		—
Total		106		123			7		3
Derivatives not designated as hedging instruments:
Foreign currency derivatives	Other current assets	10		3		Other current liabilities	22		16
Foreign currency derivatives	Other assets	—		—		Other long-term liabilities	4		1
Total		10		3			26		17
Total		$	116	$	126		$	33	$	20


	CARRYING AMOUNT OF THE HEDGED ASSETS/(LIABILITIES)				CUMULATIVE AMOUNT OF FAIR VALUE HEDGING ADJUSTMENT INCLUDED IN THE CARRYING AMOUNT OF THE HEDGED ASSETS/LIABILITIES
Balance Sheet Line Item of Hedged Item	October 30, 2021		July 31, 2021		October 30, 2021		July 31, 2021
Short-term debt	$	(506)	$	(508)	$	(6)	$	(9)
Long-term debt	$	(1,571)	$	(1,594)	$	(74)	$	(97)


	Three Months Ended
	October 30, 2021		October 24, 2020
Interest rate derivatives:
Hedged items	$	26	$	19
Derivatives designated as hedging instruments	(27)		(20)
Total	$	(1)	$	(1)


		GAINS (LOSSES) FOR THE THREE MONTHS ENDED
Derivatives Not Designated as Hedging Instruments	Line Item in Statements of Operations	October 30, 2021		October 24, 2020
Foreign currency derivatives	Other income (loss), net	$	(20)	$	14
Total return swaps—deferred compensation	Operating expenses and other	21		23
Equity derivatives	Other income (loss), net	4		5
Total		$	5	$	42


	October 30, 2021		July 31, 2021
Foreign currency derivatives	$	4,778	$	4,139
Interest rate derivatives	2,000		2,000
Total return swaps—deferred compensation	778		730
Total	$	7,556	$	6,869

We present our derivative instruments at gross fair values in the Consolidated Balance Sheets. However, our master netting and other similar arrangements with the respective counterparties allow for net settlement under certain conditions, which are designed to reduce credit risk by permitting net settlement with the same counterparty. As of October 30, 2021 and July 31, 2021, the potential effects of these rights of set-off associated with the derivative contracts would be a reduction to both derivative assets and derivative liabilities of $32 million and $17 million, respectively.

To further limit credit risk, we also enter into collateral security arrangements related to certain derivative instruments whereby cash is posted as collateral between the counterparties based on the fair market value of the derivative instrument. Under these collateral security arrangements, the net cash collateral received as of October 30, 2021 and July 31, 2021 was $82 million and $109 million, respectively. Including the effects of collateral, this results in a net derivative asset of $1 million and a net derivative liability of $3 million as of October 30, 2021 and July 31, 2021, respectively.

We conduct business globally in numerous currencies. Therefore, we are exposed to adverse movements in foreign currency exchange rates. To limit the exposure related to foreign currency changes, we enter into foreign currency contracts. We do not enter into such contracts for speculative purposes.

We hedge forecasted foreign currency transactions related to certain revenues, operating expenses and service cost of sales with currency options and forward contracts. These currency options and forward contracts, designated as cash flow hedges, generally have maturities of less than 24 months. The derivative instrument’s gain or loss is initially reported as a component of accumulated other comprehensive income (“AOCI”) and subsequently reclassified into earnings when the hedged exposure affects earnings. During the periods presented, we did not discontinue any cash flow hedges for which it was probable that a forecasted transaction would not occur.

We enter into foreign exchange forward and option contracts to reduce the short-term effects of foreign currency fluctuations on assets and liabilities such as foreign currency receivables, long-term customer financings and payables. These derivatives are not designated as hedging instruments. Gains and losses on the contracts are included in other income (loss), net, and substantially offset foreign exchange gains and losses from the remeasurement of intercompany balances, other current assets, or liabilities denominated in currencies other than the functional currency of the reporting entity.

We hedge certain net investments in our foreign operations with forward contracts to reduce the effects of foreign currency fluctuations on our net investment in those foreign subsidiaries. These derivative instruments generally have maturities of up to six months.

We hold interest rate swaps designated as fair value hedges related to fixed-rate senior notes that are due in fiscal 2022 through 2025. Under these interest rate swaps, we receive fixed-rate interest payments and make interest payments based on LIBOR plus a fixed number of basis points. The effect of such swaps is to convert the fixed interest rates of the senior fixed-rate notes to floating interest rates based on LIBOR. The gains and losses related to changes in the fair value of the interest rate swaps are included in interest expense and substantially offset changes in the fair value of the hedged portion of the underlying debt that are attributable to the changes in market interest rates.

We hold marketable equity securities in our portfolio that are subject to price risk. To diversify our overall portfolio, we also hold equity derivatives that are not designated as accounting hedges. The change in the fair value of each of these investment types are included in other income (loss), net.