Derivative instruments

12 Months Ended

Dec. 31, 2022

Entity [Table]

Disclosure Of Derivative Financial Instruments Explanatory

Note 10 Derivative instruments

Overview

Over-the-counter (OTC) derivative contracts are usually traded under a standardized International Swaps and Derivatives

Association (ISDA) master agreement or other recognized local industry-standard master agreements between UBS and

its counterparties. Terms are negotiat ed directly with counterparties and the contracts have industry-standard settlement

mechanisms prescribed by ISDA or similar industry-standard solutions. Other OTC derivatives are cleared through clearing

houses, in particular interest rate swaps with LCH, where a settled-to-market method has been generally adopted, under

which cash collateral exchanged on a daily basis is considered to legally settle the market value of the derivatives.

Regulators in various jurisdictions have introduced rules requiring the payment and collection of initial and variation

margins on certain OTC derivative contracts, which may have a bearing on price and other relevant terms .

Exchange-traded derivatives (ETD) are standardized in terms of their amounts and settlement dates, and are bought and

sold on regulated exchanges. Exchanges offer the benefits of pricing transparency, standardized daily settlement of

changes in value and, consequently, reduced credit risk.

Most of the Group’s derivative transactions relate to sales and market-making activity. Sales activities include the

structuring and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current

or expected risks. Market- making aims to directly support the facilitation and execution of client activity, and involves

quoting bid and offer prices to other market participants with the aim of generating revenues based on spread and

volume. The Group also uses various derivative instruments for hedging purposes.

›

Refer to Notes 15 and 20 for more information about derivative instruments

›

Refer to Note 25 for more information about derivatives designated in hedge accounting relationships

Risks of derivative instruments

The derivative financial assets shown on the balance sheet can be an important component of the Group’s credit

exposure; however, the positive replacement values related to a respective counterparty are rarely an adequate reflection

of the Group’s credit exposure in its derivatives business with that counterparty. This is generally the case because, on

the one hand, replacement values can increase over time (potential future exposure), while, on the other hand, exposure

may be mitigated by entering into master netting agreements and bilateral collateral arrangements. Both the exposure

measures used internally by the Group to control credit risk and the capital requirements imposed by regulators reflect

these additional factors.

›

Refer to Note 21 for more information about derivative financial assets and liabilities after consideration of netting potential

permitted under enforceable netting arrangements

›

Refer to the “Risk management and control” section of this report for more information about the risks arising from derivative

instruments

Derivative instruments

31.12.22

31.12.21

USD bn

Derivative

financial

assets

Notional

amounts

related to

derivative

financial

assets

2,3

Derivative

financial

liabilities

Notional

amounts

related to

derivative

financial

liabilities

2,3

Other

notional

amounts

2,4

Derivative

financial

assets

Notional

amounts

related to

derivative

financial

assets

2,3

Derivative

financial

liabilities

Notional

amounts

related to

derivative

financial

liabilities

2,3

Other

notional

amounts

2,4

Interest rate contracts

39.8

1,057.4

37.5

1,022.9

11,255.4

33.2

991.2

28.7

943.1

8,675.1

of which: forwards (OTC)

1

0.2

37.7

0.0

34.6

792.7

0.1

29.4

0.2

28.6

443.6

of which: swaps (OTC)

25.2

326.1

19.8

281.0

9,728.6

26.4

394.3

19.2

344.1

7,549.4

of which: options (OTC)

14.2

687.5

17.5

705.0

6.6

545.2

9.2

553.6

of which: futures (ETD)

606.3

525.0

of which: options (ETD)

0.0

6.1

0.0

2.2

127.7

0.0

22.4

0.0

16.8

157.1

Credit derivative contracts

1.0

36.8

1.2

37.1

1.4

44.7

1.8

46.3

of which: credit default swaps (OTC)

0.9

34.2

1.0

36.8

1.3

39.4

1.6

44.1

of which: total return swaps (OTC)

0.1

0.9

0.2

0.3

0.1

1.3

0.2

1.7

Foreign exchange contracts

85.5

3,087.1

88.5

2,992.7

40.1

53.3

3,030.8

54.1

2,938.8

1.2

of which: forwards (OTC)

26.5

853.4

28.6

910.2

23.8

1,008.9

23.8

1,043.2

of which: swaps (OTC)

49.6

1,679.3

50.4

1,553.7

38.4

24.3

1,606.3

24.9

1,480.3

of which: options (OTC)

9.3

551.6

9.2

521.6

5.2

412.6

5.3

408.6

Equity contracts

22.2

384.5

26.1

501.3

63.4

28.2

456.9

34.9

603.9

80.1

of which: swaps (OTC)

5.3

95.5

6.6

122.0

4.7

105.7

9.3

154.8

of which: options (OTC)

2.8

51.6

4.4

89.0

4.6

61.4

6.5

102.3

of which: futures (ETD)

52.2

71.2

of which: options (ETD)

9.0

237.0

8.1

289.7

11.2

10.2

289.6

9.8

346.3

8.8

of which: client-cleared transactions (ETD)

5.1

7.0

8.6

9.4

Commodity contracts

1.4

68.1

1.4

64.2

17.6

1.6

57.8

1.6

56.4

14.7

of which: swaps (OTC)

0.5

19.3

0.7

19.3

0.5

19.9

0.8

25.4

of which: options (OTC)

0.4

15.8

0.3

13.3

0.4

14.0

0.2

10.4

of which: futures (ETD)

16.4

13.9

of which: forwards (ETD)

0.0

24.5

0.0

23.2

0.0

18.1

0.0

15.2

of which: client-cleared transactions (ETD)

0.2

0.3

0.6

0.4

Loan commitments 

measured at FVTPL (OTC)

0.0

0.9

0.0

3.7

0.0

0.8

0.0

8.2

Unsettled purchases of non-derivative

financial instruments

5

0.1

12.1

0.1

9.4

0.1

13.3

0.2

10.6

Unsettled sales of non-derivative financial

instruments

5

0.1

13.0

0.0

10.7

0.2

18.2

0.1

9.4

Total derivative instruments, 

based on IFRS netting

6

150.1

4,659.9

154.9

4,641.9

11,376.5

118.1

4,613.8

121.3

4,616.6

8,771.1

1 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as measured at fair value through profit or loss and are recognized within derivative instruments. 2 In cases where

derivative financial instruments are presented on a net basis on the balance sheet, the respective notional amounts of the netted derivative financial instruments are still presented on a gross basis. 3 Notional

amounts of client-cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have significantly different risk profile. 4 Other notional amounts relate to derivatives that are

cleared through either a central counterparty or an exchange. The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative

instruments and Cash collateral payables on derivative instruments and was not material for any of the periods presented. 5 Changes in the fair value of purchased and sold non-derivative financial instruments

between trade date and settlement date are recognized as derivative financial instruments. 6 Derivative financial assets and liabilities are presented net on the balance sheet if UBS has the unconditional and legally

enforceable right to offset the rec ognized amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of the entity and all of the counterparties, and intends either to settle on

a net basis or to realize the asset and settle the liability simultaneously. Refer to Note 21 for more information on netting arrangements.

On a notional amount basis, approximately

46

% of OTC interest rate contracts held as of 31 December 2022

(31 December 2021:

40

%) mature within one year,

32

% (31 December 2021:

36

%) within one to five years and

22

%

31 December 2021:

25

%) after five years. 

Notional amounts of interest rate contracts cleared through either a central counterparty or an exchange that are legally

settled or economically net settled on a daily basis are presented under

Other notional amounts

 in the table above and

are categorized into maturity buckets on the basis of contractual maturities of the cleared underlying derivative contracts.

Other notional amounts related to interest rate contracts increased by USD

2.6

trn compared with 31 December 2021,

mainly reflecting higher business volumes driven by elevated interest rate volatility and inflation, partly offset by

compression activity.

UBS AG

Entity [Table]

Disclosure Of Derivative Financial Instruments Explanatory

Note 10 Derivative instruments

Overview

Over-the-counter (OTC) derivative contracts are usually traded under a standardized International Swaps and Derivatives

Association (ISDA) master agreement or other recognized local industry-standard master agreements between UBS AG

and its counterparties. Terms are negotiated directly with counterparties and the contracts have industry-standard

settlement mechanisms prescribed by ISDA or similar industry-standard solutions. Other OTC derivatives are cleared

through clearing houses, in particular interest rate swaps with LCH, where a settled-to-market method has been generally

adopted, under which cash collateral exchanged on a daily basis is considered to legally settle the market value of the

derivatives. Regulators in various jurisdictions have introduced rules requiring the payment and collection of initial and

variation margins on certain OTC derivative contracts, which may have a bearing on price and other relevant terms.

Exchange-traded derivatives (ETD) are standardized in terms of their amounts and settlement dates, and are bought and

sold on regulated exchanges. Exchanges offer the benefits of pricing transparency, standardized daily settlement of

changes in value and, consequently, reduced credit risk.

Most of UBS AG’s derivative transactions relate to sales and market-making activity. Sales activities include the structuring

and marketing of derivative products to customers to enable them to take, transfer, modify or reduce current or expected

risks. Market-making aims to directly support the facilitation and execution of client activity, and involves quoting bid and

offer prices to other market participants with the aim of generating revenues based on spread and volume. UBS AG also

uses various derivative instruments for hedging purposes.

›

Refer to Notes 15 and 20 for more information about derivative instruments

›

Refer to Note 25 for more information about derivatives designated in hedge accounting relationships

Risks of derivative instruments

The derivative financial assets shown on the balance sheet can be an important component of UBS AG’s credit exposure;

however, the positive replacement values related to a respective counterparty are rarely an adequate reflection of UBS

AG’s credit exposure in its derivatives business with that counterparty. This is generally the case because, on the one

hand, replacement values can increase over time (potential future exposure), while, on the other hand, exposure may be

mitigated by entering into master netting agreements and bilateral collateral arrangements. Both the exposure measures

used internally by UBS AG to control credit risk and the capital requirements imposed by regulators reflect these additional

factors.

›

Refer to Note 21 for more information about derivative financial assets and liabilities after consideration of netting potential

permitted under enforceable netting arrangements

›

Refer to the “Risk management and control” section of this report for more information about the risks arising from derivative

instruments

Derivative instruments

31.12.22

31.12.21

USD bn

Derivative

financial

assets

Notional

amounts

related to

derivative

financial

assets

2,3

Derivative

financial

liabilities

Notional

amounts

related to

derivative

financial

liabilities

2,3

Other

notional

amounts

2,4

Derivative

financial

assets

Notional

amounts

related to

derivative

financial

assets

2,3

Derivative

financial

liabilities

Notional

amounts

related to

derivative

financial

liabilities

2,3

Other

notional

amounts

2,4

Interest rate contracts

39.8

1,057.4

37.5

1,022.9

11,255.4

33.2

991.2

28.7

943.1

8,675.1

of which: forwards (OTC)

1

0.2

37.7

0.0

34.6

792.7

0.1

29.4

0.2

28.6

443.6

of which: swaps (OTC)

25.2

326.1

19.8

281.0

9,728.6

26.4

394.3

19.2

344.1

7,549.4

of which: options (OTC)

14.2

687.5

17.5

705.0

6.6

545.2

9.2

553.6

of which: futures (ETD)

606.3

525.0

of which: options (ETD)

0.0

6.1

0.0

2.2

127.7

0.0

22.4

0.0

16.8

157.1

Credit derivative contracts

1.0

36.8

1.2

37.1

1.4

44.7

1.8

46.3

of which: credit default swaps (OTC)

0.9

34.2

1.0

36.8

1.3

39.4

1.6

44.1

of which: total return swaps (OTC)

0.1

0.9

0.2

0.3

0.1

1.3

0.2

1.7

Foreign exchange contracts

85.5

3,087.3

88.5

2,992.7

40.1

53.3

3,031.0

54.1

2,938.8

1.2

of which: forwards (OTC)

26.5

853.6

28.6

910.2

23.8

1,009.1

23.8

1,043.2

of which: swaps (OTC)

49.6

1,679.3

50.4

1,553.7

38.4

24.3

1,606.4

24.9

1,480.3

of which: options (OTC)

9.3

551.6

9.2

521.6

5.2

412.6

5.3

408.6

Equity contracts

22.2

384.5

26.1

501.3

63.4

28.2

456.9

34.9

603.9

80.1

of which: swaps (OTC)

5.3

95.5

6.6

122.0

4.7

105.7

9.3

154.8

of which: options (OTC)

2.8

51.6

4.4

89.0

4.6

61.4

6.5

102.3

of which: futures (ETD)

52.2

71.2

of which: options (ETD)

9.0

237.0

8.1

289.7

11.2

10.2

289.6

9.8

346.3

8.8

of which: client-cleared transactions (ETD)

5.1

7.0

8.6

9.4

Commodity contracts

1.4

68.1

1.4

64.2

17.6

1.6

57.8

1.6

56.4

14.7

of which: swaps (OTC)

0.5

19.3

0.7

19.3

0.5

19.9

0.8

25.4

of which: options (OTC)

0.4

15.8

0.3

13.3

0.4

14.0

0.2

10.4

of which: futures (ETD)

16.4

13.9

of which: forwards (ETD)

0.0

24.5

0.0

23.2

0.0

18.1

0.0

15.2

of which: client-cleared transactions (ETD)

0.2

0.3

0.6

0.4

Loan commitments 

measured at FVTPL (OTC)

0.0

0.9

0.0

3.7

0.0

0.8

0.0

8.2

Unsettled purchases of non-derivative

financial instruments

5

0.1

12.1

0.1

9.4

0.1

13.3

0.2

10.6

Unsettled sales of non-derivative financial

instruments

5

0.1

13.0

0.0

10.7

0.2

18.2

0.1

9.4

Total derivative instruments, 

based on IFRS netting

6

150.1

4,660.1

154.9

4,642.0

11,376.5

118.1

4,614.0

121.3

4,616.6

8,771.1

1 Includes certain forward starting repurchase and reverse repurchase agreements that are classified as measured at fair value through profit or loss and are recognized within derivative instruments. 2 In cases where

derivative financial instruments are presented on a net basis on the bal ance sheet, the respective notional amounts of the netted derivative financial instruments are still presented on a gross basis. 3 Notional

amounts of client-cleared ETD and OTC transactions through central clearing counterparties are not disclosed, as they have significantly different risk profile. 4 Other notional amounts relate to derivatives that are

cleared through either a central counterparty or an exchange. The fair value of these derivatives is presented on the balance sheet net of the corresponding cash margin under Cash collateral receivables on derivative

instruments and Cash collateral payables on derivative instruments and was not material for any of the periods presented. 5 Changes in the fair value of purchased and sold non-derivative financial instruments

between trade date and settlement date are recognized as derivative financial instruments. 6 Derivative financial assets and liabilities are presented net on the balance sheet if UBS AG has the unconditional and

legally enforceable right to offset the recognized amounts, both in the normal course of business and in the event of default, bankruptcy or insolvency of the entity and all of the counterparties, and intends either to

settle on a net basis or to realize the asset and settle the liability simultaneously. Refer to Note 21 for more information on netting arrangements.

On a notional amount basis, approximately

46

% of OTC interest rate contracts held as of 31 December 2022

(31 December 2021:

40

%) mature within one year,

32

% (31 December 2021:

36

%) within one to five years and

22

%

31 December 2021:

25

%) after five years. 

Notional amounts of interest rate contracts cleared through either a central counterparty or an exchange that are legally

settled or economically net settled on a daily basis are presented under

Other notional amounts

 in the table above and

are categorized into maturity buckets on the basis of contractual maturities of the cleared underlying derivative contracts.

Other notional amounts related to interest rate contracts increased by USD

2.6

trn compared with 31 December 2021,

mainly reflecting higher business volumes driven by elevated interest rate volatility and inflation, partly offset by

compression activity.