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Derivative instruments (Tables)

12 Months Ended

Oct. 31, 2020

As described in Note 1, in the normal course of business, we use various derivative instruments for both trading and ALM purposes. These derivatives limit, modify or give rise to varying degrees and types of risk.


$ millions, as at October 31			2020				2019
	Assets		Liabilities		Assets		Liabilities
Trading (Note 3)	$	31,356	$	29,392	$	22,738	$	23,799
ALM (Note 3) (1)		1,374		1,116		1,157		1,314
	$	32,730	$	30,508	$	23,895	$	25,113

(1)	Comprised of derivatives that qualify for hedge accounting under IAS 39 and derivatives used for economic hedges.

Summary of Notional Amounts

The following table presents the notional amounts of derivative instruments:


$ millions, as at October 31											2020					2019
	Residual term to contractual maturity
	Less than 1 year		1 to 5 years		Over 5 years		Total notional amounts		Trading		ALM (1)		Trading			ALM (1)
Interest rate derivatives
Over-the-counter
Forward rate agreements	$	10,175	$	3,444	$	–	$	13,619	$	10,593	$	3,026	$	8,591		$	2,480
Centrally cleared forward rate agreements		146,823		2,605		–		149,428		149,428		–		320,118			–
Swap contracts		72,315		138,145		83,576		294,036		264,184		29,852		275,418			40,177
Centrally cleared swap contracts		1,227,733		1,537,632		520,617		3,285,982		2,840,793		445,189		2,780,206			355,846
Purchased options		5,200		4,622		1,120		10,942		9,188		1,754		12,883			2,358
Written options		3,957		4,914		1,265		10,136		9,370		766		14,670			1,011
		1,466,203		1,691,362		606,578		3,764,143		3,283,556		480,587		3,411,886			401,872
Exchange-traded
Futures contracts		185,639		84,020		11		269,670		269,670		–		136,627			2,266
Purchased options		3,059		1		–		3,060		3,060		–		14,616			–
Written options		5,059		1		–		5,060		5,060		–		5,758			–
		193,757		84,022		11		277,790		277,790		–		157,001			2,266
Total interest rate derivatives		1,659,960		1,775,384		606,589		4,041,933		3,561,346		480,587		3,568,887			404,138
Foreign exchange derivatives
Over-the-counter
Forward contracts		1,058,942		18,898		2,334		1,080,174		1,071,423		8,751		892,117			12,840
Swap contracts		117,017		266,263		145,735		529,015		486,689		42,326		398,262			45,510
Purchased options		16,857		2,102		49		19,008		19,008		–		19,285			–
Written options		20,792		1,877		14		22,683		22,229		454		23,947			–
		1,213,608		289,140		148,132		1,650,880		1,599,349		51,531		1,333,611			58,350
Exchange-traded
Futures contracts		3		–		–		3		3		–		26			–
Total foreign exchange derivatives		1,213,611		289,140		148,132		1,650,883		1,599,352		51,531		1,333,637			58,350
Credit derivatives
Over-the-counter
Credit default swap contracts – protection purchased		16		925		995		1,936		1,907		29		940			102
Centrally cleared credit default swap contracts – protection purchased		58		835		1,691		2,584		2,424		160		973			158
Credit default swap contracts – protection sold		41		362		220		623		614		9		328			50
Centrally cleared credit default swap contracts – protection sold		–		819		490		1,309		1,309		–		181			–
Total credit derivatives		115		2,941		3,396		6,452		6,254		198		2,422			310
Equity derivatives
Over-the-counter		66,888		24,081		810		91,779		86,865		4,914		85,310	(2)		3,347
Exchange-traded		69,675		19,807		342		89,824		89,824		–		89,529			–
Total equity derivatives		136,563		43,888		1,152		181,603		176,689		4,914		174,839			3,347
Precious metal derivatives
Over-the-counter		9,263		418		–		9,681		9,681		–		9,814			–
Exchange-traded		524		–		–		524		524		–		3,235			–
Total precious metal derivatives		9,787		418		–		10,205		10,205		–		13,049			–
Other commodity derivatives
Over-the-counter		13,999		19,309		842		34,150		34,142		8		36,819			–
Centrally cleared commodity derivatives		41		14		–		55		55		–		102			–
Exchange-traded		12,411		6,008		281		18,700		18,700		–		23,086			–
Total other commodity derivatives		26,451		25,331		1,123		52,905		52,897		8		60,007			–
Total notional amount of which:	$	3,046,487	$	2,137,102	$	760,392	$	5,943,981	$	5,406,743	$	537,238	$	5,152,841		$	466,145
Over-the-counter (3)		2,770,117		2,027,265		759,758		5,557,140		5,019,902		537,238		4,879,964			463,879
Exchange-traded		276,370		109,837		634		386,841		386,841		–		272,877			2,266

(1)	ALM: asset/liability management.

(2)	Restated from amount previously presented.

(3)

For OTC derivatives that are not centrally cleared, $1,984.6 billion (2019: $1,596.7 billion) are with counterparties that have

two-way

collateral posting arrangements, $44.9 billion (2019: $94.2 billion) are with counterparties that have

one-way

collateral posting arrangements, and $88.3 billion (2019: $184.8 billion) are with counterparties that have no collateral posting arrangements. Counterparties with whom we have more than insignificant OTC derivative portfolios and one-way collateral posting arrangements are either sovereign entities or supra national financial institutions.

Summary of Credit Exposure Arising from Derivatives


$ millions, as at October 31									2020 (1)										2019
	Current replacement cost (2)						Credit equivalent amount (3)		Risk- weighted amount		Current replacement cost (2)						Credit equivalent amount (3)		Risk- weighted amount
	Trading		ALM		Total		Credit equivalent amount (3)		Risk- weighted amount		Trading		ALM		Total		Credit equivalent amount (3)		Risk- weighted amount
Interest rate derivatives
Over-the-counter
Forward rate agreements	$	–	$	16	$	16	$	135	$	12	$	–	$	13	$	13	$	69	$	9
Swap contracts		3,974		237		4,211		6,744		2,705		2,503		155		2,658		7,140		2,507
Purchased options (4)		17		6		23		35		26		11		–		11		56		38
Written options (4)		9		–		9		5		2		6		–		6		31		29
		4,000		259		4,259		6,919		2,745		2,520		168		2,688		7,296		2,583
Exchange-traded		–		–		–		309		9		4		–		4		192		5
		4,000		259		4,259		7,228		2,754		2,524		168		2,692		7,488		2,588
Foreign exchange derivatives
Over-the-counter
Forward contracts		851		364		1,215		4,974		1,423		939		4		943		7,136		1,737
Swap contracts		358		481		839		2,324		700		735		4		739		3,546		687
Purchased options (4)		116		1		117		182		65		71		–		71		365		119
Written options (4)		47		–		47		44		20		13		–		13		106		24
		1,372		846		2,218		7,524		2,208		1,758		8		1,766		11,153		2,567
Credit derivatives
Over-the-counter
Credit default swap contracts
– protection purchased		7		9		16		144		21		2		1		3		25		7
– protection sold		10		–		10		13		6		–		–		–		2		2
		17		9		26		157		27		2		1		3		27		9
Equity derivatives
Over-the-counter		275		55		330		3,100		658		265		5		270		4,832		1,018
Exchange-traded		579		–		579		3,929		120		682		–		682		3,593		103
		854		55		909		7,029		778		947		5		952		8,425		1,121
Precious metal derivatives
Over-the-counter		58		–		58		136		55		51		–		51		332		115
Exchange-traded		–		–		–		20		1		4		–		4		171		7
		58		–		58		156		56		55		–		55		503		122
Other commodity derivatives
Over-the-counter		1,293		25		1,318		2,365		866		697		62		759		3,928		1,195
Exchange-traded		3		–		3		1,291		52		9		–		9		1,200		48
		1,296		25		1,321		3,656		918		706		62		768		5,128		1,243
RWA related to non-trade exposures to central counterparties										213										245
RWA related to CVA charge										7,202										6,990
Total derivatives		7,597		1,194		8,791		25,750		14,156		5,992		244		6,236		32,724		14,885

(1)

Effective

in the second quarter of 2020

, we adopted the IMM approach for CCR for qualifying derivative transactions which impacted the calculation of EAD and risk-weighted assets (RWA). Some derivatives are not eligible for IMM and remain under

SA-CCR.

Comparative amounts presented have not been restated.

(2)	Current replacement cost reflects the current mark-to-market (MTM) value of derivatives offset by eligible financial collateral, where present.

(3)

Under IMM, effective expected positive exposure (EEPE) is used, which computes through simulation, the expected exposures with consideration to the expected movements in underlying risk factor and netting/collateral agreements. The EAD is calculated as EEPE multiplied by the prescribed alpha factor of 1.4. The EAD under

SA-CCR

is calculated as the sum of replacement cost and potential future exposure, multiplied by the prescribed alpha factor of 1.4.

(4)	Prior year amounts have been reclassified to conform to the presentation adopted in the current year.

Summary of Detailed Information About Credit Risk

The following table presents the current replacement cost of derivatives by geographic region based on the location of the derivative counterparty:


$ millions, as at October 31							2020								2019
	Canada		U.S.		Other countries		Total		Canada		U.S.		Other countries		Total
Derivative instruments
By counterparty type
Financial institutions	$	921	$	949	$	1,156	$	3,026	$	534	$	1,063	$	549	$	2,146
Governments		982		–		4		986		891		–		8		899
Corporate		1,823		1,774		1,182		4,779		951		1,017		1,223		3,191
Total derivative instruments	$	3,726	$	2,723	$	2,342	$	8,791	$	2,376	$	2,080	$	1,780	$	6,236