Fair Value Disclosures |
Fair Value Measurements Valuation Techniques for Assets and Liabilities Measured at Fair Value on a Recurring Basis Asset and Liability / Valuation Technique | Valuation Hierarchy Classification | Trading Assets and Trading Liabilities | | U.S. Treasury and Agency Securities | | | U.S. Treasury Securities | • Generally Level 1 | • Fair value is determined using quoted market prices. | | U.S. Agency Securities | • Level 1 - non-callable agency-issued debt securities | • Non-callable agency-issued debt securities are generally valued using quoted market prices, and callable agency-issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for comparable instruments. | • Generally Level 2 - callable agency-issued debt securities, agency mortgage pass-through pool securities and CMOs | • The fair value of agency mortgage pass-through pool securities is model-driven based on spreads of comparable to-be-announced securities. | • Level 3 - in instances where the inputs are unobservable | • CMOs are generally valued using quoted market prices and trade data adjusted by subsequent changes in related indices for comparable instruments. | | | Other Sovereign Government Obligations | • Generally Level 1 | • Fair value is determined using quoted prices in active markets when available. | • Level 2 - if the market is less active or prices are dispersed | | • Level 3 - in instances where the prices are unobservable | | State and Municipal Securities | • Generally Level 2 – if value based on observable market data for comparable instruments | • Fair value is determined using recently executed transactions, market price quotations or pricing models that factor in, where applicable, interest rates, bond or CDS spreads and volatility and/or volatility skew, adjusted for any basis difference between cash and derivative instruments. | | RMBS, CMBS, ABS (collectively known as Mortgage- and Asset-backed securities) | • Generally Level 2 - if value based on observable market data for comparable instruments | • Mortgage- and asset-backed securities may be valued based on price or spread data obtained from observed transactions or independent external parties such as vendors or brokers. | • Level 3 - if external prices or significant spread inputs are unobservable or if the comparability assessment involves significant subjectivity related to property type differences, cash flows, performance and other inputs | • When position-specific external price data are not observable, the fair value determination may require benchmarking to comparable instruments, and/or analyzing expected credit losses, default and recovery rates, and/or applying discounted cash flow techniques. When evaluating the comparable instruments for use in the valuation of each security, security collateral-specific attributes, including payment priority, credit enhancement levels, type of collateral, delinquency rates and loss severity, are considered. In addition, for RMBS borrowers, FICO scores and the level of documentation for the loan are considered. | | • Market standard models, such as Intex, Trepp or others, may be deployed to model the specific collateral composition and cash flow structure of each transaction. Key inputs to these models are market spreads, forecasted credit losses, and default and prepayment rates for each asset category. | | • Valuation levels of RMBS and CMBS indices are used as an additional data point for benchmarking purposes or to price outright index positions. | | | Corporate Bonds | • Generally Level 2 - if value based on observable market data for comparable instruments | • Fair value is determined using recently executed transactions, market price quotations, bond spreads, CDS spreads, or at the money volatility and/or volatility skew obtained from independent external parties, such as vendors and brokers, adjusted for any basis difference between cash and derivative instruments. | • Level 3 – in instances where prices or significant spread inputs are unobservable | • The spread data used are for the same maturity as the bond. If the spread data do not reference the issuer, then data that reference a comparable issuer are used. When position-specific external price data are not observable, fair value is determined based on either benchmarking to comparable instruments or cash flow models with yield curves, bond or single name CDS spreads and recovery rates as significant inputs. | | | CDO | • Level 2 - when either comparable market transactions are observable or credit correlation input is insignificant | • The Firm holds cash CDOs that typically reference a tranche of an underlying synthetic portfolio of single name CDS spreads collateralized by corporate bonds (CLN) or cash portfolio of ABS/loans (“asset-backed CDOs”). | • Level 3 - when either comparable market transactions are unobservable or the credit correlation input is significant | • Credit correlation, a primary input used to determine the fair value of CLNs, is usually unobservable and derived using a benchmarking technique. Other model inputs such as credit spreads, including collateral spreads, and interest rates are typically observable. | | • Asset-backed CDOs are valued based on an evaluation of the market and model input parameters sourced from comparable instruments as indicated by market activity. Each asset-backed CDO position is evaluated independently taking into consideration available comparable market levels, underlying collateral performance and pricing, deal structures and liquidity. | | | Loans and Lending Commitments | • Level 2 - if value based on observable market data for comparable instruments | • Fair value of corporate loans is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, market observable CDS spread levels obtained from independent external parties adjusted for any basis difference between cash and derivative instruments, along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable. | • Level 3 - in instances where prices or significant spread inputs are unobservable | • Fair value of contingent corporate lending commitments is determined by using executed transactions on comparable loans and the anticipated market price based on pricing indications from syndicate banks and customers. The valuation of loans and lending commitments also takes into account fee income that is considered an attribute of the contract. | | • Fair value of mortgage loans is determined using observable prices based on transactional data or third-party pricing for comparable instruments, when available. | | • Where position-specific external prices are not observable, fair value is estimated based on benchmarking to prices and rates observed in the primary market for similar loan or borrower types or based on the present value of expected future cash flows using its best estimates of the key assumptions, including forecasted credit losses, prepayment rates, forward yield curves and discount rates commensurate with the risks involved or a methodology that utilizes the capital structure and credit spreads of recent comparable securitization transactions. | | • Fair value of equity margin loans is determined by discounting future interest cash flows, net of estimated credit losses. The estimated credit losses are derived by benchmarking to market observable CDS spreads, implied debt yields or volatility metrics of the loan collateral company. | | | | For further information on loans and lending commitments, see Note 7. | | | Corporate Equities | • Level 1 - exchange-traded securities and fund units if actively traded | • Exchange-traded equity securities are generally valued based on quoted prices from the exchange. To the extent these securities are actively traded, valuation adjustments are not applied. | • Level 2 - exchange-traded securities if not actively traded or if undergoing a recent mergers and acquisitions event or corporate action | • Unlisted equity securities are generally valued based on an assessment of each underlying security, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable Firm transactions, trading multiples and changes in market outlook, among other factors. | • Level 3 - unlisted equity securities and exchange-traded securities if not actively traded or if marked to an aged mergers and acquisitions event or corporate action | • Listed fund units are generally marked to the exchange-traded price, while listed fund units if not actively traded and unlisted fund units are generally marked to NAV. | | | Derivative and Other Contracts | | | Listed Derivative Contracts | • Level 1 - listed derivatives that are actively traded | • Listed derivatives that are actively traded are valued based on quoted prices from the exchange. | • Level 2 - listed derivatives that are not actively traded | • Listed derivatives that are not actively traded are valued using the same approaches as those applied to OTC derivatives. | | | OTC Derivative Contracts | • Generally Level 2 - OTC derivative products valued using observable inputs, or where the unobservable input is not deemed significant | • OTC derivative contracts include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities, equity prices or commodity prices. | • Level 3 – OTC derivative products for which the unobservable input is deemed significant | • Depending on the product and the terms of the transaction, the fair value of OTC derivative products can be modeled using a series of techniques, including closed-form analytic formulas, such as the Black-Scholes option-pricing model, simulation models or a combination thereof. Many pricing models do not entail material subjectivity as the methodologies employed do not necessitate significant judgment, since model inputs may be observed from actively quoted markets, as is the case for generic interest rate swaps, many equity, commodity and foreign currency option contracts, and certain CDS. In the case of more established derivative products, the pricing models used by the Firm are widely accepted by the financial services industry. | | • More complex OTC derivative products are typically less liquid and require more judgment in the implementation of the valuation technique since direct trading activity or quotes are unobservable. This includes certain types of interest rate derivatives with both volatility and correlation exposure, equity, commodity or foreign currency derivatives that are either longer-dated or include exposure to multiple underlyings, and credit derivatives, including CDS on certain mortgage- or asset-backed securities and basket CDS. Where these inputs are unobservable, relationships to observable data points, based on historic and/or implied observations, may be employed as a technique to estimate the model input values. | | | | For further information on the valuation techniques for OTC derivative products, see Note 2. | | For further information on derivative instruments and hedging activities, see Note 4. | | | Investments | • Level 1 - exchange-traded direct equity investments in an active market | • Investments include direct investments in equity securities, as well as various investment management funds, which include investments made in connection with certain employee deferred compensation plans. For direct investments, initially, the transaction price is generally considered by the Firm as the exit price and is its best estimate of fair value. | • Level 2 - non-exchange-traded direct equity investments and investments in various investment management funds if valued based on rounds of financing or third-party transactions; exchange-traded direct equity investments if not actively traded | • After initial recognition, in determining the fair value of non-exchange-traded internally and externally managed funds, the Firm generally considers the NAV of the fund provided by the fund manager to be the best estimate of fair value. For non-exchange-traded investments either held directly or held within internally managed funds, fair value after initial recognition is based on an assessment of each underlying investment, considering rounds of financing and third-party transactions, discounted cash flow analyses and market-based information, including comparable Firm transactions, trading multiples and changes in market outlook, among other factors. Exchange-traded direct equity investments are generally valued based on quoted prices from the exchange. | • Level 3 - non-exchange-traded direct equity investments and investments in various investment management funds where rounds of financing or third-party transactions are not available | | Physical Commodities | • Generally Level 2 if value based on observable inputs | • The Firm trades various physical commodities, including natural gas and precious metals. | • Fair value is determined using observable inputs, including broker quotations and published indices. | Investment Securities—AFS Securities | | • AFS securities are composed of U.S. government and agency securities (e.g., U.S. Treasury securities, agency-issued debt, agency mortgage pass-through securities and CMOs), CMBS, FFELP student loan ABS, auto loan ABS, corporate bonds, CLO and actively traded equity securities. | For further information on Valuation Hierarchy Classification, see corresponding Valuation Technique described herein. | | For further information on the determination of fair value, refer to the corresponding asset/liability valuation technique described herein. | For further information on AFS securities, see Note 5. | Deposits | | | Certificates of Deposit | • Generally Level 2 | • The Firm issues FDIC-insured certificates of deposit that pay either fixed coupons or that have repayment terms linked to the performance of debt or equity securities, indices or currencies. The fair value of these certificates of deposit is determined using valuation models that incorporate observable inputs referencing identical or comparable securities, including prices to which the deposits are linked, interest rate yield curves, option volatility and currency rates, equity prices, and the impact of the Firm’s own credit spreads, adjusted for the impact of the FDIC insurance, which is based on vanilla deposit issuance rates. | Securities Purchased under Agreements to Resell and Securities Sold under Agreements to Repurchase | | • Fair value is computed using a standard cash flow discounting methodology. | • Generally Level 2 | • The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks, interest rate yield curves and option volatilities. | • Level 3 - in instances where the unobservable inputs are deemed significant | Borrowings | | Structured Notes | • Generally Level 2 | • The Firm issues structured notes that have coupon or repayment terms linked to the performance of debt or equity securities, indices, currencies or commodities. | • Level 3 - in instances where the unobservable inputs are deemed significant | • Fair value of structured notes is determined using valuation models for the derivative and debt portions of the notes. These models incorporate observable inputs referencing identical or comparable securities, including prices to which the notes are linked, interest rate yield curves, option volatility and currency rates, and commodity or equity prices. | | • Independent, external and traded prices for the notes are considered as well. The impact of the Firm’s own credit spreads is also included based on observed secondary bond market spreads. | |
Assets and Liabilities Measured at Fair Value on a Recurring Basis | | | | | | | | | | | | | At December 31, 2017 | $ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | Assets at fair value | | | | | | | | | | | Trading assets: | | | | | | | | | | | U.S. Treasury and | | | | | | | | | agency | | | | | | | | | | | securities | $ | 22,077 | $ | 26,888 | $ | — | $ | — | $ | 48,965 | Other sovereign | | | | | | | | | | | government | | | | | | | | | | | obligations2 | | 20,234 | | 7,825 | | 1 | | — | | 28,060 | State and municipal | | | | | | | | | | | securities | | — | | 3,592 | | 8 | | — | | 3,600 | MABS | | — | | 2,364 | | 423 | | — | | 2,787 | Corporate bonds | | — | | 15,105 | | 456 | | — | | 15,561 | CDO | | — | | 445 | | 84 | | — | | 529 | Loans and lending | | | | | | | | | | commitments3 | — | | 4,791 | | 5,945 | | — | | 10,736 | Other debt | | — | | 1,287 | | 161 | | — | | 1,448 | Corporate equities4 | | 149,697 | | 492 | | 166 | | — | | 150,355 | Derivative and other contracts: | | | | | | | | | Interest rate | | 472 | | 178,704 | | 1,763 | | — | | 180,939 | Credit | | — | | 7,602 | | 420 | | — | | 8,022 | Foreign exchange | 58 | | 53,724 | | 15 | | — | | 53,797 | Equity | | 1,101 | | 40,359 | | 3,530 | | — | | 44,990 | Commodity and | | | | | | | | | | | other | | 1,126 | | 5,390 | | 4,147 | | — | | 10,663 | Netting1 | | (2,088) | | (216,764) | | (1,575) | | (47,171) | | (267,598) | Total derivative and | | | | | | | | | | | other contracts | | 669 | | 69,015 | | 8,300 | | (47,171) | | 30,813 | Investments5 | | 297 | | 523 | | 1,020 | | — | | 1,840 | Physical commodities | — | | 1,024 | | — | | — | | 1,024 | Total trading assets5 | | 192,974 | | 133,351 | | 16,564 | | (47,171) | | 295,718 | Investment securities— | | | | | | | | | | AFS | | 27,522 | | 27,681 | | — | | — | | 55,203 | Intangible assets | | — | | 3 | | — | | — | | 3 | Total assets | | | | | | | | | | | at fair value | $ | 220,496 | $ | 161,035 | $ | 16,564 | $ | (47,171) | $ | 350,924 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | At December 31, 2017 | $ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | Liabilities at fair value | | | | | | | | | Deposits | $ | — | $ | 157 | $ | 47 | $ | — | $ | 204 | Trading liabilities: | | | | | | | | | | | U.S. Treasury and | | | | | | | | | | | agency securities | 17,802 | | 24 | | — | | — | | 17,826 | Other sovereign | | | | | | | | | | | government | | | | | | | | | | | obligations2 | | 24,857 | | 2,016 | | — | | — | | 26,873 | Corporate and other | | | | | | | | | | | debt | | — | | 7,141 | | 3 | | — | | 7,144 | Corporate equities4 | | 52,653 | | 82 | | 22 | | — | | 52,757 | Derivative and other contracts: | | | | | | | | | Interest rate | | 364 | | 162,239 | | 545 | | — | | 163,148 | Credit | | — | | 8,166 | | 379 | | — | | 8,545 | Foreign exchange | 23 | | 55,118 | | 127 | | — | | 55,268 | Equity | | 1,001 | | 44,666 | | 2,322 | | — | | 47,989 | Commodity and | | | | | | | | | | | other | 1,032 | | 5,156 | | 2,701 | | — | | 8,889 | Netting1 | | (2,088) | | (216,764) | | (1,575) | | (36,717) | | (257,144) | Total derivative and | | | | | | | | | | | other contracts | | 332 | | 58,581 | | 4,499 | | (36,717) | | 26,695 | Total trading liabilities | | 95,644 | | 67,844 | | 4,524 | | (36,717) | | 131,295 | Securities sold under | | | | | | | | | | | agreements to | | | | | | | | | | | repurchase | | — | | 650 | | 150 | | — | | 800 | Other secured | | | | | | | | | | | financings | | — | | 3,624 | | 239 | | — | | 3,863 | Borrowings | | — | | 43,928 | | 2,984 | | — | | 46,912 | Total liabilities | | | | | | | | | | | at fair value | $ | 95,644 | $ | 116,203 | $ | 7,944 | $ | (36,717) | $ | 183,074 | |
| At December 31, 2016 | $ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | Assets at fair value | | | | | | | | | Trading assets: | | | | | | | | | | | U.S. Treasury and | | | | | | | | | agency | | | | | | | | | | | securities | $ | 27,579 | $ | 20,392 | $ | 74 | $ | — | $ | 48,045 | Other sovereign | | | | | | | | | | government | | | | | | | | | | | obligations | | 14,005 | | 5,497 | | 6 | | — | | 19,508 | State and municipal | | | | | | | | | securities | | — | | 2,355 | | 250 | | — | | 2,605 | MABS | — | | 1,691 | | 217 | | — | | 1,908 | Corporate bonds | — | | 11,051 | | 232 | | — | | 11,283 | CDO | — | | 602 | | 63 | | — | | 665 | Loans and lending | | | | | | | | | | commitments3 | — | | 3,580 | | 5,122 | | — | | 8,702 | Other debt | | — | | 1,360 | | 180 | | — | | 1,540 | Corporate equities4 | 131,574 | | 352 | | 446 | | — | | 132,372 | Derivative and other contracts: | | | | | | | | | Interest rate | | 1,131 | | 300,406 | | 1,373 | | — | | 302,910 | Credit | | — | | 11,727 | | 502 | | — | | 12,229 | Foreign exchange | 231 | | 74,921 | | 13 | | — | | 75,165 | Equity | | 1,185 | | 35,736 | | 1,708 | | — | | 38,629 | Commodity and | | | | | | | | | | other | | 2,808 | | 6,734 | | 3,977 | | — | | 13,519 | Netting1 | | (4,378) | | (353,543) | | (1,944) | | (51,381) | | (411,246) | Total derivative and | | | | | | | | | | other contracts | 977 | | 75,981 | | 5,629 | | (51,381) | | 31,206 | Investments5 | | 237 | | 197 | | 958 | | — | | 1,392 | Physical commodities | — | | 112 | | — | | — | | 112 | Total trading assets5 | 174,372 | | 123,170 | | 13,177 | | (51,381) | | 259,338 | Investment securities— | | | | | | | | | AFS | | 29,120 | | 34,050 | | — | | — | | 63,170 | Securities purchased | | | | | | | | | | under agreements | | | | | | | | | | to resell | | — | | 302 | | — | | — | | 302 | Intangible assets | | — | | 3 | | — | | — | | 3 | Total assets | | | | | | | | | | at fair value | $ | 203,492 | $ | 157,525 | $ | 13,177 | $ | (51,381) | $ | 322,813 |
| At December 31, 2016 | $ in millions | Level 1 | Level 2 | Level 3 | Netting1 | Total | Liabilities at fair value | | | | | | | | | Deposits | $ | — | $ | 21 | $ | 42 | $ | — | $ | 63 | Trading liabilities: | | | | | | | | | | | U.S. Treasury and | | | | | | | | | | agency securities | 11,636 | | 61 | | — | | — | | 11,697 | Other sovereign | | | | | | | | | | | government | | | | | | | | | | | obligations | | 20,658 | | 2,430 | | — | | — | | 23,088 | Corporate and other | | | | | | | | | | | debt | | — | | 6,121 | | 36 | | — | | 6,157 | Corporate equities4 | | 57,847 | | 54 | | 35 | | — | | 57,936 | Derivative and other contracts: | | | | | | | | | Interest rate | | 1,244 | | 285,379 | | 953 | | — | | 287,576 | Credit | | — | | 12,550 | | 875 | | — | | 13,425 | Foreign exchange | 17 | | 75,510 | | 56 | | — | | 75,583 | Equity | | 1,162 | | 37,828 | | 1,524 | | — | | 40,514 | Commodity and | | | | | | | | | | | other | | 2,663 | | 6,845 | | 2,377 | | — | | 11,885 | Netting1 | | (4,378) | | (353,543) | | (1,944) | | (39,803) | | (399,668) | Total derivative and | | | | | | | | | | | other contracts | | 708 | | 64,569 | | 3,841 | | (39,803) | | 29,315 | Physical commodities | — | | 1 | | — | | — | | 1 | Total trading liabilities | | 90,849 | | 73,236 | | 3,912 | | (39,803) | | 128,194 | Securities sold under | | | | | | | | | | | agreements to | | | | | | | | | | | repurchase | | — | | 580 | | 149 | | — | | 729 | Other secured | | | | | | | | | | | financings | | — | | 4,607 | | 434 | | — | | 5,041 | Borrowings | | 47 | | 37,081 | | 2,014 | | — | | 39,142 | Total liabilities | | | | | | | | | | | at fair value | $ | 90,896 | $ | 115,525 | $ | 6,551 | $ | (39,803) | $ | 173,169 |
MABS—Mortgage- and asset-backed securities - For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash collateral netting are included in the column titled “Netting.” Positions classified within the same level that are with the same counterparty are netted within that level. For further information on derivative instruments and hedging activities, see Note 4.
- During 2017, the Firm transferred from Level 2 to Level 1 $1.2 billion and $1.0 billion of Trading assets—Other sovereign government obligations and Trading liabilities—Other sovereign government obligations, respectively, due to increased market activity in these instruments.
- For further breakdown by type, see the following Loans and Lending Commitments at Fair Value table.
- For trading purposes, the Firm holds or sells short equity securities issued by entities in diverse industries and of varying sizes.
- Amounts exclude certain investments that are measured at fair value using the NAV per share, which are not classified in the fair value hierarchy. For additional disclosure about such investments, see “Fair Value of Investments Measured at Net Asset Value” herein.
Loans and Lending Commitments at Fair Value | | | | | | $ in millions | At December 31, 2017 | At December 31, 2016 | Corporate | $ | 8,358 | $ | 7,217 | Residential real estate | | 799 | | 966 | Wholesale real estate | | 1,579 | | 519 | Total | $ | 10,736 | $ | 8,702 |
Unsettled Fair Value of Futures Contracts1 | | | | | | | | $ in millions | At December 31, 2017 | At December 31, 2016 | Customer and other receivables, net | $ | 831 | $ | 610 |
- These contracts are primarily Level 1, actively traded, valued based on quoted prices from the exchange and are excluded from the previous recurring fair value tables.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables present additional information about Level 3 assets and liabilities measured at fair value on a recurring basis. Level 3 instruments may be hedged with instruments classified in Level 1 and Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities within the Level 3 category presented in the following tables do not reflect the related realized and unrealized gains (losses) on hedging instruments that have been classified by the Firm within the Level 1 and/or Level 2 categories. Additionally, the unrealized gains (losses) during the period for assets and liabilities within the Level 3 category presented in the following tables herein may include changes in fair value during the period that were attributable to both observable and unobservable inputs. Total realized and unrealized gains (losses) are primarily included in Trading revenues in the income statements. Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2017 | $ in millions | Beginning Balance at December 31, 2016 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at December 31, 2017 | Unrealized Gains (Losses) | Assets at fair value | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | U.S. Treasury and agency securities | $ | 74 | $ | (1) | $ | — | $ | (240) | $ | — | $ | 167 | $ | — | $ | — | Other sovereign government obligations | | 6 | | — | | — | | (5) | | — | | — | | 1 | | — | State and municipal securities | | 250 | | 3 | | 6 | | (83) | | — | | (168) | | 8 | | — | MABS | 217 | | 47 | | 289 | | (158) | | (37) | | 65 | | 423 | | (7) | Corporate bonds | | 232 | | 22 | | 381 | | (218) | | — | | 39 | | 456 | | (4) | CDO | | 63 | | 22 | | 40 | | (31) | | (9) | | (1) | | 84 | | 15 | Loans and lending commitments | | 5,122 | | 182 | | 3,616 | | (1,561) | | (1,463) | | 49 | | 5,945 | | 131 | Other debt | | 180 | | 38 | | 66 | | (171) | | — | | 48 | | 161 | | 12 | Corporate equities | | 446 | | (54) | | 173 | | (632) | | — | | 233 | | 166 | | (6) | Net derivative and other contracts3: | | | | | | | | | | | | | | | | | Interest rate | | 420 | | 322 | | 29 | | (18) | | 608 | | (143) | | 1,218 | | 341 | Credit | | (373) | | (43) | | — | | (1) | | 455 | | 3 | | 41 | | (18) | Foreign exchange | | (43) | | (108) | | — | | (1) | | 31 | | 9 | | (112) | | (89) | Equity | | 184 | | 136 | | 988 | | (524) | | 396 | | 28 | | 1,208 | | 159 | Commodity and other | | 1,600 | | 515 | | 24 | | (57) | | (343) | | (293) | | 1,446 | | 20 | Total net derivative and other contracts | | 1,788 | | 822 | | 1,041 | | (601) | | 1,147 | | (396) | | 3,801 | | 413 | Investments | | 958 | | 96 | | 102 | | (57) | | (78) | | (1) | | 1,020 | | 88 | | | | | | | | | | | | | | | | | | | | | Liabilities at fair value | | | | | | | | | | | | | | | | | Deposits | $ | 42 | $ | (3) | $ | — | $ | 12 | $ | (3) | $ | (7) | $ | 47 | $ | (3) | Trading liabilities: | | | | | | | | | | | | | | | | | Corporate and other debt | | 36 | | — | | (63) | | 11 | | — | | 19 | | 3 | | — | Corporate equities | | 35 | | 1 | | (76) | | 9 | | — | | 55 | | 22 | | — | Securities sold under agreements to repurchase | 149 | | — | | — | | 1 | | — | | — | | 150 | | — | Other secured financings | | 434 | | (35) | | — | | 64 | | (251) | | (43) | | 239 | | (28) | Borrowings | | 2,014 | | (196) | | — | | 1,968 | | (424) | | (770) | | 2,984 | | (173) |
- Loan originations and consolidations of VIEs are included in Purchases and deconsolidations of VIEs are included in Settlements.
- Amounts related to entering into Net derivative and other contracts, Deposits, Other secured financings and Borrowings primarily represent issuances. Amounts for other line items primarily represent sales.
- Net derivative and other contracts represent Trading assets—Derivative and other contracts, net of Trading liabilities—Derivative and other contracts. Amounts are presented before counterparty netting.
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2016 | $ in millions | Beginning Balance at December 31, 2015 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at December 31, 2016 | Unrealized Gains (Losses) | Assets at fair value | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | U.S. Treasury and agency securities | $ | — | $ | (4) | $ | 72 | $ | — | $ | — | $ | 6 | $ | 74 | $ | (4) | Other sovereign government obligations | | 4 | | 1 | | 4 | | (7) | | — | | 4 | | 6 | | — | State and municipal securities | | 19 | | — | | 249 | | (18) | | — | | — | | 250 | | — | MABS | 438 | | (69) | | 82 | | (323) | | — | | 89 | | 217 | | (77) | Corporate bonds | | 267 | | 9 | | 310 | | (357) | | — | | 3 | | 232 | | (20) | CDO | | 430 | | 11 | | 14 | | (300) | | — | | (92) | | 63 | | (5) | Loans and lending commitments | | 5,936 | | (79) | | 2,261 | | (954) | | (1,863) | | (179) | | 5,122 | | (80) | Other debt | | 448 | | 20 | | 26 | | (51) | | — | | (263) | | 180 | | (13) | Corporate equities | | 434 | | (2) | | 242 | | (154) | | — | | (74) | | 446 | | — | Net derivative and other contracts3: | | | | | | | | | | | | | | | | | Interest rate | | 260 | | 529 | | 1 | | — | | (83) | | (287) | | 420 | | 463 | Credit | | (844) | | (176) | | — | | (4) | | 623 | | 28 | | (373) | | (167) | Foreign exchange | | 141 | | (27) | | — | | — | | (220) | | 63 | | (43) | | (23) | Equity | | (2,031) | | 539 | | 809 | | (337) | | 1,073 | | 131 | | 184 | | 376 | Commodity and other | | 1,050 | | 544 | | 24 | | (114) | | (44) | | 140 | | 1,600 | | 304 | Total net derivative and other contracts | | (1,424) | | 1,409 | | 834 | | (455) | | 1,349 | | 75 | | 1,788 | | 953 | Investments | | 707 | | (32) | | 398 | | (75) | | (59) | | 19 | | 958 | | (50) | Intangible assets | | 5 | | — | | — | | — | | — | | (5) | | — | | — | | | | | | | | | | | | | | | | | | Liabilities at fair value | | | | | | | | | | | | | | | | | Deposits | $ | 19 | $ | — | $ | — | $ | 23 | $ | — | $ | — | $ | 42 | $ | — | Trading liabilities: | | | | | | | | | | | | | | | | | Corporate and other debt | | 4 | | (4) | | (99) | | 145 | | — | | (18) | | 36 | | — | Corporate equities | | 18 | | 17 | | (10) | | 89 | | — | | (45) | | 35 | | — | Securities sold under agreements to repurchase | 151 | | 2 | | — | | — | | — | | — | | 149 | | 2 | Other secured financings | | 461 | | (5) | | — | | 79 | | (45) | | (66) | | 434 | | (5) | Borrowings | | 1,988 | | (19) | | — | | 648 | | (305) | | (336) | | 2,014 | | (30) |
- Loan originations and consolidations of VIEs are included in Purchases and deconsolidations of VIEs are included in Settlements.
- Amounts related to entering into Net derivative and other contracts, Deposits, Other secured financings and Borrowings primarily represent issuances. Amounts for other line items primarily represent sales.
- Net derivative and other contracts represent Trading assets—Derivative and other contracts, net of Trading liabilities—Derivative and other contracts. Amounts are presented before counterparty netting.
Rollforward of Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2015 | $ in millions | Beginning Balance at December 31, 2014 | Realized and Unrealized Gains (Losses) | Purchases1 | Sales and Issuances2 | Settlements1 | Net Transfers | Ending Balance at December 31, 2015 | Unrealized Gains (Losses) | Assets at fair value | | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | | | | | | | | | | Other sovereign government obligations | $ | 41 | $ | (1) | $ | 2 | $ | (30) | $ | — | $ | (8) | $ | 4 | $ | — | State and municipal securities | | — | | 2 | | 3 | | — | | — | | 14 | | 19 | | 2 | MABS | | 347 | | (13) | | 226 | | (136) | | — | | 14 | | 438 | | (20) | Corporate bonds | | 386 | | (44) | | 374 | | (381) | | (53) | | (15) | | 267 | | (44) | CDOs | | 1,152 | | 123 | | 325 | | (798) | | (344) | | (28) | | 430 | | (19) | Loans and lending commitments | | 5,874 | | (42) | | 3,216 | | (207) | | (2,478) | | (427) | | 5,936 | | (76) | Other debt | | 285 | | (23) | | 131 | | (5) | | (81) | | 141 | | 448 | | (9) | Corporate equities | | 272 | | (1) | | 374 | | (333) | | — | | 122 | | 434 | | 11 | Net derivative and other contracts3: | | | | | | | | | | | | | | | | | Interest rate | | (173) | | (51) | | 58 | | (54) | | 207 | | 273 | | 260 | | 20 | Credit | | (743) | | (172) | | 19 | | (121) | | 196 | | (23) | | (844) | | (179) | Foreign exchange | | 151 | | 53 | | 4 | | (2) | | (18) | | (47) | | 141 | | 52 | Equity | | (2,165) | | 166 | | 81 | | (311) | | 22 | | 176 | | (2,031) | | 62 | Commodity and other | | 1,146 | | 433 | | 35 | | (222) | | (116) | | (226) | | 1,050 | | 402 | Total net derivative and other contracts | | (1,784) | | 429 | | 197 | | (710) | | 291 | | 153 | | (1,424) | | 357 | Investments | | 1,158 | | (1) | | 33 | | (139) | | (188) | | (156) | | 707 | | (1) | Intangible assets | | 6 | | — | | — | | — | | (1) | | — | | 5 | | — | | | | | | | | | | | | | | | | | | Liabilities at fair value | | | | | | | | | | | | | | | | | Deposits | $ | — | $ | (1) | $ | — | $ | 18 | $ | — | $ | — | $ | 19 | $ | (1) | Trading liabilities: | | | | | | | | | | | | | | | | | Corporate and other debt | | 121 | | 5 | | (20) | | 13 | | (104) | | (1) | | 4 | | 5 | Corporate equities | | 45 | | 79 | | (86) | | 33 | | — | | 105 | | 18 | | 79 | Securities sold under agreements to repurchase | | 153 | | 2 | | — | | — | | — | | — | | 151 | | 2 | Other secured financings | | 149 | | 192 | | — | | 327 | | (232) | | 409 | | 461 | | 181 | Borrowings | | 1,934 | | 61 | | — | | 882 | | (364) | | (403) | | 1,988 | | 52 |
- Loan originations and consolidations of VIEs are included in Purchases and deconsolidations of VIEs are included in Settlements.
- Amounts related to entering into Net derivative and other contracts, Deposits, Other secured financings and Borrowings primarily represent issuances. Amounts for other line items primarily represent sales.
- Net derivative and other contracts represent Trading assets—Derivative and other contracts, net of Trading liabilities—Derivative and other contracts. Amounts are presented before counterparty netting.
Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements The following disclosures provide information on the valuation techniques, significant unobservable inputs, and their ranges and averages for each major category of assets and liabilities measured at fair value on a recurring and nonrecurring basis with a significant Level 3 balance. The level of aggregation and breadth of products cause the range of inputs to be wide and not evenly distributed across the inventory. Further, the range of unobservable inputs may differ across firms in the financial services industry because of diversity in the types of products included in each firm’s inventory. There are no predictable relationships between multiple significant unobservable inputs attributable to a given valuation technique. A single amount is disclosed when there is no significant difference between the minimum, maximum and average (weighted average or simple average/median). Valuation Techniques and Sensitivity of Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements | | | | | | | Predominant Valuation Techniques/Significant Unobservable Inputs | Range (Weighted Average or Simple Average/Median)1 | $ in millions, except inputs | At December 31, 2017 | | At December 31, 2016 | Recurring Fair Value Measurement | | | | Assets at fair value | | | | U.S. Treasury and agency securities ($— and $74) | | | | Comparable pricing: | Comparable bond price | N/A | | 96 to 105 points (102 points) | State and municipal securities ($8 and $250) | | | | Comparable pricing: | Comparable bond price | N/M | | 53 to 100 points (91 points) | MABS ($423 and $217) | | | Comparable pricing: | Comparable bond price | 0 to 95 points (26 points) | | 0 to 86 points (27 points) | | | | | | | Predominant Valuation Techniques/Significant Unobservable Inputs | Range (Weighted Average or Simple Average/Median)1 | $ in millions, except inputs | At December 31, 2017 | | At December 31, 2016 | Corporate bonds ($456 and $232) | | | | Comparable pricing: | Comparable bond price | 3 to 134 points (59 points) | | 3 to 130 points (70 points) | Discounted cash flow: | Recovery rate | 6% to 36% (27%) | | N/A | CDO ($84 and $63) | | | | Comparable pricing: | Comparable bond price | 16 to 101 points (67 points) | | 0 to 103 points (50 points) | Loans and lending commitments ($5,945 and $5,122) | | | | Expected recovery: | Asset coverage | N/M | | 43% to 100% (83%) | Margin loan model: | Discount rate | 0% to 3% (1%) | | 2% to 8% (3%) | | Volatility skew | 7% to 41% (22%) | | 21% to 63% (33%) | Comparable pricing: | Comparable loan price | 55 to 102 points (95 points) | | 45 to 100 points (84 points) | Discounted cash flow: | WACC | N/M | | 5% | | Capitalization rate | N/M | | 4% to 10% (4%) | Other debt ($161 and $180) | | | | Option model: | At the money volatility | 17% to 52% (52%) | | 16% to 52% (52%) | Discounted cash flow: | Discount rate | 7% to 20% (14%) | | 7% to 12% (11%) | Comparable pricing: | Comparable loan price | N/M | | 1 to 74 points (23 points) | Corporate equities ($166 and $446) | | | | Comparable pricing: | Comparable equity price | 100% | | 100% | Net derivative and other contracts2: | | | | Interest rate ($1,218 and $420) | | | | Option model: | Interest rate - Foreign exchange correlation | N/M | | 28% to 58% (44% / 43%) | | Interest rate volatility skew | 31% to 97% (41% / 47%) | | 19% to 117% (55% / 56%) | | Interest rate quanto correlation | N/M | | -17% to 31% (1% / -5%) | | Interest rate curve correlation | N/M | | 28% to 96% (68% / 72%) | | Inflation volatility | 23% to 63% (44% / 41%) | | 23% to 55% (40% / 39%) | | Interest rate curve | 2% | | N/M | Credit ($41 and $(373)) | | | | Comparable pricing: | Cash synthetic basis | 12 to 13 points (12 points) | | 5 to 12 points (11 points) | | Comparable bond price | 0 to 75 points (25 points) | | 0 to 70 points (23 points) | Correlation model: | Credit correlation | 38% to 100% (48%) | | 32% to 70% (45%) | Foreign exchange3 ($(112) and $(43)) | | | | Option model: | Interest rate - Foreign exchange correlation | 54% to 57% (56% / 56%) | | 28% to 58% (44% / 43%) | | Interest rate volatility skew | 31% to 97% (41% / 47%) | | 34% to 117% (55% / 56%) | | Contingency probability | 95% to 100% (96% / 95%) | | N/M | | Interest rate quanto correlation | N/M | | -17% to 31% (1% / -5%) | Equity3 ($1,208 and $184) | | | | Option model: | At the money volatility | 7% to 54% (32%) | | 7% to 66% (33%) | | Volatility skew | -5% to 0% (-1%) | | -4% to 0% (-1%) | | Equity - Equity correlation | 5% to 99% (76%) | | 25% to 99% (73%) | | Equity - Foreign exchange correlation | -55% to 40% (36%) | | -63% to 30% (-43%) | | Equity - Interest rate correlation | -7% to 49% (18% / 20%) | | -8% to 52% (12% / 4%) | Commodity and other ($1,446 and $1,600) | | | | Option model: | Forward power price | $4 to $102 ($31) per MWh | | $7 to $90 ($32) per MWh | | Commodity volatility | 7% to 205% (17%) | | 6% to 130% (18%) | | Cross-commodity correlation | 5% to 99% (92%) | | 5% to 99% (92%) | Investments ($1,020 and $958) | | | | Discounted cash flow: | WACC | 8% to 15% (9%) | | 10% | | Exit multiple | 8 to 11 times (10 times) | | 10 to 24 times (11 times) | Market approach: | EBITDA multiple | 6 to 25 times (11 times) | | 6 to 24 times (12 times) | Comparable pricing: | Comparable equity price | 45% to 100% (92%) | | 75% to 100% (93%) | | | | | | | Predominant Valuation Techniques/Significant Unobservable Inputs | Range (Weighted Average or Simple Average/Median)1 | $ in millions, except inputs | At December 31, 2017 | | At December 31, 2016 | Liabilities at Fair Value | | | | Securities sold under agreements to repurchase ($150 and $149) | | | Discounted cash flow: | Funding spread | 107 to 126 bps (120 bps) | | 118 to 127 bps (121 bps) | Other secured financings ($239 and $434) | | | | Discounted cash flow: | Funding spread | 39 to 76 bps (57 bps) | | 63 to 92 bps (78 bps) | Option model: | Volatility skew | -1% | | -1% | | At the money volatility | 10% to 40% (26%) | | N/M | Discounted cash flow: | Discount rate | N/M | | 4% | Borrowings ($2,984 and $2,014) | | | | Option model: | At the money volatility | 5% to 35% (22%) | | 7% to 42% (30%) | | Volatility skew | -2% to 0% (0%) | | -2% to 0% (-1%) | | Equity - Equity correlation | 39% to 95% (86%) | | 35% to 99% (84%) | | Equity - Foreign exchange correlation | -55% to 10% (-18%) | | -63% to 13% (-40%) | Option model: | Equity volatility discount | N/M | | 7% to 11% (10% / 10%) | Nonrecurring Fair Value Measurement | | | | Assets at fair value | | | | Loans ($924 and $2,443) | | | | Corporate loan model: | Credit spread | 93 to 563 bps (239 bps) | | 90 to 487 bps (208 bps) | Expected recovery: | Asset coverage | 95% to 99% (95%) | | 73% to 99% (97%) |
Points—Percentage of par - Amounts represent weighted averages except where simple averages and the median of the inputs are provided when more relevant.
- CVA and FVA are included in the balance but excluded from the Valuation Technique(s) and Significant Unobservable Inputs. CVA is a Level 3 input when the underlying counterparty credit curve is unobservable. FVA is a Level 3 input in its entirety given the lack of observability of funding spreads in the principal market.
- Includes derivative contracts with multiple risks (i.e., hybrid products).
Significant Unobservable Inputs — Description | Sensitivity | Asset coverage - The ratio of a borrower's underlying pledged assets less applicable costs relative to their outstanding debt (while considering the loan's principal and the seniority and security of the loan commitment). | In general, an increase (decrease) to the asset coverage for an asset would result in a higher (lower) fair value. | Capitalization rate - The ratio between net operating income produced by an asset and its market value at the projected disposition date. | In general, an increase (decrease) to the capitalization rate for an asset would result in a lower (higher) fair value. | Cash synthetic basis - The measure of the price differential between cash financial instruments and their synthetic derivative-based equivalents. The range disclosed in the table above signifies the number of points by which the synthetic bond equivalent price is higher than the quoted price of the underlying cash bonds. | In general, an increase (decrease) to the cash synthetic basis for an asset would result in a lower (higher) fair value. | Comparable bond or loan price - A pricing input used when prices for the identical instrument are not available. Significant subjectivity may be involved when fair value is determined using pricing data available for comparable instruments. Valuation using comparable instruments can be done by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable bond or loan, then adjusting that yield (or spread) to derive a value for the bond or loan. The adjustment to yield (or spread) should account for relevant differences in the bonds or loans such as maturity or credit quality. | In general, an increase (decrease) to the comparable bond or loan price for an asset would result in a higher (lower) fair value. | | Alternatively, a price-to-price basis can be assumed between the comparable instrument and the bond or loan being valued in order to establish the value of the bond or loan. Additionally, as the probability of default increases for a given bond or loan (i.e., as the bond or loan becomes more distressed), the valuation of that bond or loan will increasingly reflect its expected recovery level assuming default. The decision to use price-to-price or yield/spread comparisons largely reflects trading market convention for the financial instruments in question. Price-to-price comparisons are primarily employed for RMBS, CMBS, ABS, CDOs, CLOs, Other debt, interest rate contracts, foreign exchange contracts, Other secured financings and distressed corporate bonds. Implied yield (or spread over a liquid benchmark) is utilized predominately for non-distressed corporate bonds, loans and credit contracts. | Comparable equity price - A price derived from equity raises, share buybacks and external bid levels, etc. A discount or premium may be included in the fair value estimate. | In general, an increase (decrease) to the comparable equity price of an asset would result in a higher (lower) fair value. | Contingency probability - Probability associated with the realization of an underlying event upon which the value of an asset is contingent. | In general, an increase (decrease) to the contingency probability for an asset would result in a higher (lower) fair value. | Correlation - A pricing input where the payoff is driven by more than one underlying risk. Correlation is a measure of the relationship between the movement of two variables (i.e., how the change in one variable influences a change in the other variable). Credit correlation, for example, is the factor that describes the relationship between the probability of individual entities to default on obligations and the joint probability of multiple entities to default on obligations. | In general, an increase (decrease) to the correlation would result in an impact to the fair value, but the magnitude and direction of the impact would depend on whether the Firm is long or short the exposure. | Credit spread - The difference in yield between different securities due to differences in credit quality. The credit spread reflects the additional net yield an investor can earn from a security with more credit risk relative to one with less credit risk. The credit spread of a particular security is often quoted in relation to the yield on a credit risk-free benchmark security or reference rate, typically either U.S. Treasury or LIBOR. | In general, an increase (decrease) to the credit spread of an asset would result in a lower (higher) fair value. | EBITDA multiple / Exit multiple - The ratio of the Enterprise Value to EBITDA, where the Enterprise Value is the aggregate value of equity and debt minus cash and cash equivalents. The EBITDA multiple reflects the value of the company in terms of its full-year EBITDA, whereas the exit multiple reflects the value of the company in terms of its full-year expected EBITDA at exit. Either multiple allows comparison between companies from an operational perspective as the effect of capital structure, taxation and depreciation/amortization is excluded. | In general, an increase (decrease) to the EBITDA or Exit multiple of an asset would result in a higher (lower) fair value. | Funding spread - The difference between the general collateral rate (which refers to the rate applicable to a broad class of U.S. Treasury issuances) and the specific collateral rate (which refers to the rate applicable to a specific type of security pledged as collateral, such as a municipal bond). Repurchase agreements and certain other secured financings are discounted based on collateral curves. The curves are constructed as spreads over the corresponding OIS or LIBOR curves, with the short end of the curve representing spreads over the corresponding OIS curves and the long end of the curve representing spreads over LIBOR. | In general, an increase (decrease) to the funding spread of an asset would result in a lower (higher) fair value. | WACC - The WACC implied by the current value of equity in a discounted cash flow model. The model assumes that the cash flow assumptions, including projections, are fully reflected in the current equity value, while the debt to equity ratio is held constant. The WACC theoretically represents the required rate of return to debt and equity investors. | In general, an increase (decrease) to the Implied weighted cost of capital of an asset would result in a lower (higher) fair value. | Interest rate curve - The term structure of interest rates (relationship between interest rates and the time to maturity) and a market’s measure of future interest rates at the time of observation. An interest rate curve is used to set interest rate and foreign exchange derivative cash flows and is a pricing input used in the discounting of any OTC derivative cash flow. | In general, an increase (decrease) to the interest rate curve would result in an impact to the fair value, but the magnitude and direction of the impact would depend on whether the Firm is long or short the exposure. | Recovery rate - Amount expressed as a percentage of par that is expected to be received when a credit event occurs. | In general, an increase (decrease) to the recovery rate for an asset would result in a higher (lower) fair value. | Volatility - The measure of the variability in possible returns for an instrument given how much that instrument changes in value over time. Volatility is a pricing input for options and, generally, the lower the volatility, the less risky the option. The level of volatility used in the valuation of a particular option depends on a number of factors, including the nature of the risk underlying that option (e.g., the volatility of a particular underlying equity security may be significantly different from that of a particular underlying commodity index), the tenor and the strike price of the option. | In general, an increase (decrease) to the volatility would result in an impact to the fair value, but the magnitude and direction of the impact would depend on whether the Firm is long or short the exposure. | Volatility skew - The measure of the difference in implied volatility for options with identical underliers and expiry dates but with different strikes. The implied volatility for an option with a strike price that is above or below the current price of an underlying asset will typically deviate from the implied volatility for an option with a strike price equal to the current price of that same underlying asset. | In general, an increase (decrease) to the volatility skew would result in an impact to the fair value, but the magnitude and direction of the impact would depend on whether the Firm is long or short the exposure. |
Fair Value of Investments Measured at Net Asset Value Investments in Certain Funds Measured at NAV per Share | | | | | | | | | | | At December 31, 2017 | At December 31, 2016 | $ in millions | Fair Value | Commitment | Fair Value | Commitment | Private equity | $ | 1,674 | $ | 308 | $ | 1,566 | $ | 335 | Real estate | | 800 | | 183 | | 1,103 | | 136 | Hedge1 | | 90 | | 4 | | 147 | | 4 | Total | $ | 2,564 | $ | 495 | $ | 2,816 | $ | 475 |
- Investments in hedge funds may be subject to initial period lock-up or gate provisions, which restrict an investor from withdrawing from the fund during a certain initial period or restrict the redemption amount on any redemption date, respectively.
Private Equity Funds. Funds that pursue multiple strategies, including leveraged buyouts, venture capital, infrastructure growth capital, distressed investments and mezzanine capital. In addition, the funds may be structured with a focus on specific domestic or foreign geographic regions. Real Estate Funds. Funds that invest in real estate assets such as commercial office buildings, retail properties, multi-family residential properties, developments or hotels. In addition, the funds may be structured with a focus on specific geographic domestic or foreign regions. Investments in private equity and real estate funds generally are not redeemable due to the closed-ended nature of these funds. Instead, distributions from each fund will be received as the underlying investments of the funds are disposed and monetized. Hedge Funds. Funds that pursue various investment strategies, including long-short equity, fixed income/credit, event-driven and multi-strategy. Nonredeemable Funds by Contractual Maturity | | | | | | | Fair Value at December 31, 2017 | $ in millions | Private Equity | Real Estate | Less than 5 years | $ | 473 | $ | 62 | 5-10 years | | 1,033 | | 499 | Over 10 years | | 168 | | 239 | Total | $ | 1,674 | $ | 800 |
Fair Value Option The Firm elected the fair value option for certain eligible instruments that are risk managed on a fair value basis to mitigate income statement volatility caused by measurement basis differences between the elected instruments and their associated risk management transactions or to eliminate complexities of applying certain accounting models. Earnings Impact of Instruments under the Fair Value Option | | | | | | | | | | | | | Interest | | | | Trading | Income | Net | $ in millions | Revenues | (Expense) | Revenues | 2017 | | | | | Securities purchased under | | | | | | | agreements to resell | $ | (2) | $ | 3 | $ | 1 | Deposits | | (3) | | ─ | | (3) | Securities sold under | | | | | | | agreements to repurchase1 | | 10 | | (18) | | (8) | Borrowings1 | | (4,507) | | (443) | | (4,950) |
2016 | | | | Securities purchased under | | | | | | | agreements to resell | $ | (3) | $ | 7 | $ | 4 | Deposits | | (1) | | (1) | | (2) | Securities sold under | | | | | | | agreements to repurchase1 | | 6 | | (13) | | (7) | Borrowings1 | | (707) | | (483) | | (1,190) |
2015 | | | | Securities purchased under | | | | | | | agreements to resell | $ | (6) | $ | 10 | $ | 4 | Securities sold under | | | | | | | agreements to repurchase1 | | 13 | | (6) | | 7 | Borrowings1 | | 2,467 | | (528) | | 1,939 |
1. In 2017 and 2016, unrealized DVA gains (losses) are recorded in OCI and, when realized, in Trading revenues. In 2015, realized and unrealized DVA gains (losses) were recorded in Trading revenues. See Note 15 for further information. Gains (losses) are mainly attributable to changes in foreign currency rates or interest rates or movements in the reference price or index for Borrowings before the impact of related hedges. The amounts in the previous table are included within Net revenues and do not reflect any gains or losses on related hedging instruments. In addition to the amounts in the previous table, as discussed in Note 2, instruments within Trading assets or Trading liabilities are measured at fair value. Gains (Losses) Due to Changes in Instrument-Specific Credit Risk | | | | | | | | $ in millions | | | Trading Revenues | OCI | 2017 | | | | | | | Loans and other debt1 | $ | 159 | $ | ─ | Lending commitments2 | | (2) | | ─ | Securities sold under agreements to repurchase3 | | ─ | | (7) | Borrowings3 | | (12) | | (903) | 2016 | | | | | | | Loans and other debt1 | $ | (71) | $ | ─ | Lending commitments2 | | 4 | | ─ | Borrowings3 | | 31 | | (460) | 2015 | | | | | | | Loans and other debt1 | $ | (193) | $ | ─ | Lending commitments2 | | 12 | | ─ | Borrowings3 | | 618 | | ─ |
$ in millions | At December 31, 2017 | At December 31, 2016 | Cumulative pre-tax DVA gain | | | | | (loss) recognized in AOCI | $ | (1,831) | $ | (921) |
1. Loans and other debt instrument-specific credit gains (losses) were determined by excluding the non-credit components of gains and losses. 2. Gains (losses) on lending commitments were generally determined based on the difference between estimated expected client yields and contractual yields at each respective period-end. 3. In 2017 and 2016, unrealized DVA gains (losses) are recorded in OCI and, when realized, in Trading revenues. In 2015, realized and unrealized DVA gains (losses) were recorded in Trading revenues. See Note 15 for further information. Borrowings Measured at Fair Value on a Recurring Basis | | | | | | | | | At | At | | | December 31, | December 31, | $ in millions | 2017 | 2016 | Business Unit Responsible for Risk Management | Equity | $ | 25,903 | $ | 21,066 | Interest rates | | 19,230 | | 16,051 | Foreign exchange | | 666 | | 1,114 | Credit | | 815 | | 647 | Commodities | | 298 | | 264 | Total | $ | 46,912 | $ | 39,142 | | | | | | |
Excess of Contractual Principal Amount Over Fair Value | | | | | | | At | At | | December 31, | December 31, | $ in millions | 2017 | 2016 | Loans and other debt1 | $ | 13,481 | $ | 13,495 | Loans 90 or more days past due | | | | | and/or on nonaccrual status1 | | 11,253 | | 11,502 | Borrowings2 | | 71 | | 720 |
1. The majority of the difference between principal and fair value amounts for loans and other debt relates to distressed debt positions purchased at amounts well below par. 2. Borrowings do not include structured notes where the repayment of the initial principal amount fluctuates based on changes in a reference price or index. Fair Value Loans on Nonaccrual Status | | | | | | | At | At | | December 31, | December 31, | $ in millions | 2017 | 2016 | Nonaccrual loans | $ | 1,240 | $ | 1,536 | Nonaccrual loans 90 or more | | | | | days past due | $ | 779 | $ | 787 |
The previous tables exclude non-recourse debt from consolidated VIEs, liabilities related to failed sales of financial assets, pledged commodities and other liabilities that have specified assets attributable to them. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis | | At December 31, 2017 | | | | Fair Value | | | $ in millions | | Level 2 | | Level 31 | | Total | Assets | | | | | | | Loans | $ | 1,394 | $ | 924 | $ | 2,318 | Other assets—Other | | | | | | | investments | | ─ | | 144 | | 144 | Total | $ | 1,394 | $ | 1,068 | $ | 2,462 | Liabilities | | | | | | | Other liabilities and | | | | | | | accrued expenses— | | | | | | | Lending commitments | $ | 158 | $ | 38 | $ | 196 | Total | $ | 158 | $ | 38 | $ | 196 |
| | At December 31, 2016 | | | Fair Value | | | $ in millions | | Level 2 | | Level 31 | | Total | Assets | | | | | | | Loans | $ | 2,470 | $ | 2,443 | $ | 4,913 | Other assets—Other | | | | | | | investments | | ─ | | 123 | | 123 | Other assets—Premises, | | | | | | | equipment and | | | | | | | software costs | | 22 | | 3 | | 25 | Total | $ | 2,492 | $ | 2,569 | $ | 5,061 | Liabilities | | | | | | | Other liabilities and | | | | | | | accrued expenses— | | | | | | | Lending commitments | $ | 166 | $ | 60 | $ | 226 | Total | $ | 166 | $ | 60 | $ | 226 |
- For significant Level 3 balances, refer to “Significant Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements” section herein for details of the significant unobservable inputs used for nonrecurring fair value measurement.
Gains (Losses)1 | | | | | | | | | | | | | | | $ in millions | 2017 | 2016 | 2015 | Assets | | | | | | | Loans2 | $ | 18 | $ | 40 | $ | (220) | Other assets—Other | | | | | | | investments3 | | (66) | | (52) | | (3) | Other assets—Premises, | | | | | | | equipment and | | | | | | | software costs4 | | (25) | | (76) | | (44) | Intangible assets5 | | ─ | | (2) | | ─ | Other assets6 | | ─ | | ─ | | (22) | Total | $ | (73) | $ | (90) | $ | (289) | Liabilities | | | | | | | Other liabilities and | | | | | | | accrued expenses— | | | | | | | Lending commitments2 | $ | 75 | $ | 121 | $ | (207) | Total | $ | 75 | $ | 121 | $ | (207) |
- Gains and losses for Loans and Other assets—Other investments are classified in Other revenues. For other items, gains and losses are recorded in Other revenues if the item is held for sale, otherwise in Other expenses.
- Nonrecurring changes in the fair value of loans and lending commitments were calculated as follows: for the held for investment category, based on the value of the underlying collateral; and for the held for sale category, based on recently executed transactions, market price quotations, valuation models that incorporate market observable inputs where possible, such as comparable loan or debt prices and CDS spread levels adjusted for any basis difference between cash and derivative instruments, or default recovery analysis where such transactions and quotations are unobservable.
- Losses related to Other assets—Other investments were determined using techniques that included discounted cash flow models, methodologies that incorporate multiples of certain comparable companies and recently executed transactions.
- Losses related to Other assets—Premises, equipment and software costs were determined using techniques that included a default recovery analysis and recently executed transactions.
- Losses related to Intangible assets were determined using techniques that included discounted cash flow models and methodologies that incorporate multiples of certain comparable companies.
- Losses related to Other assets were determined primarily using a default recovery analysis.
Valuation Techniques for Assets and Liabilities Not Measured at Fair Value | Investment Securities—HTM securities | • Fair value is determined using quoted market prices. | Securities purchased under agreements to resell/Securities sold under agreements to repurchase, Securities borrowed/Securities loaned, and Other secured financings | • Typically longer dated instruments for which the fair value is determined using standard cash flow discounting methodology. | • The inputs to the valuation include contractual cash flows and collateral funding spreads, which are estimated using various benchmarks and interest rate yield curves. | Customer and other receivables | • For the portion of the customer and other receivables where fair value does not equal carrying value, the fair value is determined using collateral information, historical resolution and recovery rates and employee termination data. The cash flow is then discounted using a market observable spread over LIBOR. | Loans | • The fair value of consumer and residential real estate loans and lending commitments where position-specific external price data are not observable is determined based on the credit risks of the borrower using a probability of default and loss given default method, discounted at the estimated external cost of funding level. | • The fair value of corporate loans and lending commitments is determined using recently executed transactions, market price quotations (where observable), implied yields from comparable debt, market observable CDS spread levels along with proprietary valuation models and default recovery analysis where such transactions and quotations are unobservable. | Borrowings | • The fair value is generally determined based on transactional data or third-party pricing for identical or comparable instruments, when available. Where position-specific external prices are not observable, fair value is determined based on current interest rates and credit spreads for debt instruments with similar terms and maturity. | The carrying value of the remaining assets and liabilities not measured at fair value in the following tables approximate fair value due to their short-term nature. |
Financial Instruments Not Measured at Fair Value | | At December 31, 2017 | | | | Carrying | Fair Value | $ in millions | | Value | | Level 1 | | Level 2 | | Level 3 | | Total | Financial Assets | | | | | | | | Cash and cash equivalents: | | | | | | | | Cash and due | | | | | | | | | | | from banks | $ | 24,816 | $ | 24,816 | $ | — | $ | — | $ | 24,816 | Interest bearing | | | | | | | | | | | deposits with | | | | | | | | | | | banks | | 21,348 | | 21,348 | | — | | — | | 21,348 | Restricted cash | 34,231 | | 34,231 | | — | | — | | 34,231 | Investment securities— | | | | | | | HTM | | 23,599 | | 11,119 | | 11,673 | | 289 | | 23,081 | Securities purchased | | | | | | | under agreements | | | | | | | to resell | | 84,258 | | — | | 78,239 | | 5,978 | | 84,217 | Securities borrowed | 124,010 | | — | | 124,018 | | 1 | | 124,019 | Customer and other | | | | | | | | | | receivables1 | | 51,269 | | — | | 47,159 | | 3,984 | | 51,143 | Loans2 | | 104,126 | | — | | 21,290 | | 82,928 | | 104,218 | Other assets | 433 | | — | | 433 | | — | | 433 | | | | | | | | | | | | | Financial Liabilities | | | | | | | Deposits | $ | 159,232 | $ | — | $ | 159,232 | $ | — | $ | 159,232 | Securities sold | | | | | | | | | | | under agreements | | | | | | | to repurchase | | 55,624 | | — | | 51,752 | | 3,867 | | 55,619 | Securities loaned | | 13,592 | | — | | 13,191 | | 401 | | 13,592 | Other secured | | | | | | | | | | | financings | | 7,408 | | — | | 5,987 | | 1,431 | | 7,418 | Customer and | | | | | | | | | | | other payables1 | 188,464 | | — | | 188,464 | | — | | 188,464 | Borrowings | | 145,670 | | — | | 151,692 | | 30 | | 151,722 |
| | | At December 31, 2016 | | | | Carrying | Fair Value | $ in millions | | Value | | Level 1 | | Level 2 | | Level 3 | | Total | Financial Assets | | | | | | | Cash and cash equivalents: | | | | | | | | | Cash and due | | | | | | | | | | | from banks | $ | 22,017 | $ | 22,017 | $ | — | $ | — | $ | 22,017 | Interest bearing | | | | | | | | | | | deposits with | | | | | | | | | | | banks | | 21,364 | | 21,364 | | — | | — | | 21,364 | Restricted cash | 33,979 | | 33,979 | | — | | — | | 33,979 | Investment securities— | | | | | | | HTM | | 16,922 | | 5,557 | | 10,896 | | — | | 16,453 | Securities purchased | | | | | | | under agreements | | | | | | | to resell | | 101,653 | | — | | 97,825 | | 3,830 | | 101,655 | Securities borrowed | 125,236 | | — | | 125,093 | | 147 | | 125,240 | Customer and other | | | | | | | | | | receivables1 | | 41,679 | | — | | 36,962 | | 4,575 | | 41,537 | Loans2 | | 94,248 | | — | | 20,906 | | 74,121 | | 95,027 | | | | | | | | | | | | | Financial Liabilities | | | | | | | Deposits | $ | 155,800 | $ | — | $ | 155,800 | $ | — | $ | 155,800 | Securities sold | | | | | | | | | | | under agreements | | | | | | | to repurchase | | 53,899 | | — | | 50,941 | | 2,972 | | 53,913 | Securities loaned | | 15,844 | | — | | 15,853 | | — | | 15,853 | Other secured | | | | | | | | | | | financings | | 6,077 | | — | | 4,792 | | 1,290 | | 6,082 | Customer and | | | | | | | | | | | other payables1 | 187,497 | | — | | 187,497 | | — | | 187,497 | Borrowings | | 126,574 | | — | | 130,361 | | 51 | | 130,412 |
- Accrued interest, fees, and dividend receivables and payables where carrying value approximates fair value have been excluded.
- Amounts include loans measured at fair value on a nonrecurring basis.
Lending Commitments—Held for Investment and Held for Sale | | | | | | | | | | | | | Commitment | Fair Value | $ in millions | Amount1 | | Level 2 | | Level 3 | | Total | December 31, 2017 | $ | 100,151 | $ | 620 | $ | 174 | $ | 794 | December 31, 2016 | | 97,409 | | 973 | | 268 | | 1,241 |
- For further discussion on lending commitments, see Note 12.
The previous tables exclude certain financial instruments such as equity method investments and all non-financial assets and liabilities such as the value of the long-term relationships with the Firm’s deposit customers.
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