

8	Derivatives



Notional contract amounts and fair values of derivatives by product contract type held by HSBC
	Notional contract amount		Fair value amount
	Assets and liabilities		Assets				Liabilities
	Trading	Hedging	Trading	Hedging	Total		Trading	Hedging	Total
	$m	$m	$m	$m	$m		$m	$m	$m
Foreign exchange	7,383,599	36,888	83,704	366	84,070		84,600	729	85,329
Interest rate	17,590,866	165,107	291,177	2,522	293,699		274,938	3,550	278,488
Equities	648,250	—	10,697	—	10,697		11,836	—	11,836
Credit	329,551	—	3,661	—	3,661		5,000	—	5,000
Commodity and other	134,410	—	2,764	—	2,764		3,516	—	3,516
Gross total fair values	26,086,676	201,995	392,003	2,888	394,891		379,890	4,279	384,169
Offset					(81,110	)			(81,110	)
At 30 Jun 2020	26,086,676	201,995	392,003	2,888	313,781		379,890	4,279	303,059

Foreign exchange	8,207,629	31,899	84,083	455	84,538		84,498	740	85,238
Interest rate	17,895,349	177,006	183,668	1,208	184,876		175,095	2,031	177,126
Equities	1,077,347	—	9,053	—	9,053		11,237	—	11,237
Credit	345,644	—	4,744	—	4,744		5,597	—	5,597
Commodity and other	93,245	—	1,523	—	1,523		2,038	—	2,038
Gross total fair values	27,619,214	208,905	283,071	1,663	284,734		278,465	2,771	281,236
Offset					(41,739	)			(41,739	)
At 31 Dec 2019	27,619,214	208,905	283,071	1,663	242,995		278,465	2,771	239,497

The notional contract amounts of derivatives held for trading purposes and derivatives designated in qualifying hedge accounting relationships indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk. Derivative assets and liabilities increased during 1H20, reflecting changes in yield curves and the market environment.

Derivatives valued using models with unobservable inputs

The following table shows the difference between the fair value at initial recognition, which is the transaction price, and the value that would have been derived had valuation techniques used for subsequent measurement been applied at initial recognition, less subsequent releases.



Unamortised balance of derivatives valued using models with significant unobservable inputs
		Half-year to
		30 Jun		30 Jun		31 Dec
		2020		2019		2019
	Footnotes	$m		$m		$m
Unamortised balance at beginning of period		73		86		99
Deferral on new transactions		106		90		55
Recognised in the income statement during the period		(87	)	(78	)	(76	)
– amortisation		(51	)	(36	)	(44	)
– subsequent to unobservable inputs becoming observable		(1	)	(6	)	3
– maturity, termination or offsetting derivative		(35	)	(36	)	(35	)
Exchange differences		(3	)	—		1
Other		—		1		(6	)
Unamortised balance at end of period	1	89		99		73


1	This amount is yet to be recognised in the consolidated income statement.

Hedge accounting derivatives

The notional contract amounts of derivatives held for hedge accounting purposes indicate the nominal value of transactions outstanding at the balance sheet date, not amounts at risk.



Notional contract amounts of derivatives held for hedging purposes by product type
	At 30 Jun 2020		At 31 Dec 2019
	Cash flow hedges	Fair value hedges	Cash flow hedges	Fair value hedges
	$m	$m	$m	$m
Foreign exchange	26,374	14	21,385	14
Interest rate	39,590	125,517	54,253	122,753
Total	65,964	125,531	75,638	122,767

The Group applies hedge accounting in respect of certain consolidated net investments. Hedging is undertaken using forward foreign exchange contracts or by financing with foreign currency borrowings. At 30 June 2020, the notional contract values of outstanding financial instruments designated as hedges of net investments in foreign operations were $10,500m (31 December 2019: $10,500m).