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Derivative Instruments (Tables)
6 Months Ended
Jun. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract] 
Notional amount of derivative contracts
 
 
Notional amounts(b)
(in billions)
 
June 30, 2011

December 31, 2010

Interest rate contracts
 
 
 
Swaps
 
$
44,191

$
46,299

Futures and forwards
 
8,871

9,298

Written options
 
4,361

4,075

Purchased options
 
4,623

3,968

Total interest rate contracts
 
62,046

63,640

Credit derivatives(a)
 
6,105

5,472

Foreign exchange contracts
 
 
 

Cross-currency swaps
 
2,875

2,568

Spot, futures and forwards
 
4,624

3,893

Written options
 
718

674

Purchased options
 
711

649

Total foreign exchange contracts
 
8,928

7,784

Equity contracts
 
 
 
Swaps
 
130

116

Futures and forwards
 
51

49

Written options
 
519

430

Purchased options
 
473

377

Total equity contracts
 
1,173

972

Commodity contracts
 
 
 

Swaps
 
401

349

Spot, futures and forwards
 
189

170

Written options
 
307

264

Purchased options
 
297

254

Total commodity contracts
 
1,194

1,037

Total derivative notional amounts
 
$
79,446

$
78,905

(a)
Primarily consists of credit default swaps. For more information on volumes and types of credit derivative contracts, see the Credit derivatives discussion on pages 123–124 of this Note.
(b)
Represents the sum of gross long and gross short third-party notional derivative contracts.
Impact of derivatives on the Consolidated Balance Sheets
 
Derivative receivables
 
Derivative payables
June 30, 2011
(in millions)
Not designated
as hedges
Designated
as hedges
Total derivative
receivables
 
Not
designated
as hedges
Designated
as hedges
Total
derivative payables
Trading assets and liabilities
 
 
 
 
 
 
 
 
 
Interest rate
$
994,157

$
5,747

 
$
999,904

 
$
962,219

$
1,352

 
$
963,571

Credit
129,022

—

 
129,022

 
125,474

—

 
125,474

Foreign exchange(b)
154,697

3,663

 
158,360

 
151,498

1,777

 
153,275

Equity
47,054

—

 
47,054

 
46,642

—

 
46,642

Commodity
57,717

315

 
58,032

 
56,582

1,732

 
58,314

Gross fair value of trading assets and liabilities
$
1,382,647

$
9,725

 
$
1,392,372

 
$
1,342,415

$
4,861

 
$
1,347,276

Netting adjustment(c)
 
 
 
(1,314,989
)
 
 
 
 
(1,283,608
)
Carrying value of derivative trading assets and trading liabilities on the Consolidated Balance Sheets
 
 
 
$
77,383

 
 
 
 
$
63,668

 
 
 
 
 
 
 
 
 
 
 
Derivative receivables
 
Derivative payables
December 31, 2010
Not designated
as hedges

Designated
as hedges
Total derivative
receivables

 
Not
designated
as hedges

Designated
as hedges
Total
derivative payables

Trading assets and liabilities
 
 
 
 
 
 
 
 
 
Interest rate
$
1,121,703

$
6,279

 
$
1,127,982

 
$
1,089,604

$
840

 
$
1,090,444

Credit
129,729

—

 
129,729

 
125,061

—

 
125,061

Foreign exchange(b)
165,240

3,231

 
168,471

 
163,671

1,059

 
164,730

Equity
43,633

—

 
43,633

 
46,399

—

 
46,399

Commodity
59,573

24

 
59,597

 
56,397

2,078

(d) 
58,475

Gross fair value of trading assets and liabilities
$
1,519,878

$
9,534

 
$
1,529,412

 
$
1,481,132

$
3,977

 
$
1,485,109

Netting adjustment(c)
 
 
 
(1,448,931
)
 
 
 
 
(1,415,890
)
Carrying value of derivative trading assets and trading liabilities on the Consolidated Balance Sheets
 
 
 
$
80,481

 
 
 
 
$
69,219

(a)
Excludes structured notes for which the fair value option has been elected. See Note 4 on pages 114–116 of this Form 10-Q and Note 4 on pages 187–189 of JPMorgan Chase’s 2010 Annual Report for further information.
(b)
Excludes $15 million and $21 million of foreign currency-denominated debt designated as a net investment hedge at June 30, 2011, and December 31, 2010, respectively.
(c)
U.S. GAAP permits the netting of derivative receivables and payables, and the related cash collateral received and paid when a legally enforceable master netting agreement exists between the Firm and a derivative counterparty.
(d)
Excludes $1.0 billion related to commodity derivatives that are embedded in a debt instrument and used as fair value hedging instruments that are recorded in the line item of the host contract (other borrowed funds) for December 31, 2010.
Derivative receivables and payables mark-to-market
 
Trading assets – Derivative receivables
 
Trading liabilities – Derivative payables
(in millions)
June 30, 2011
December 31, 2010
 
June 30, 2011
December 31, 2010
Contract type
 
 
 
 
 
Interest rate
$
32,911

$
32,555

 
$
17,306

$
20,387

Credit
6,198

7,725

 
4,878

5,138

Foreign exchange
19,898

25,858

 
19,015

25,015

Equity
7,084

4,204

 
11,430

10,450

Commodity
11,292

10,139

 
11,039

8,229

Total
$
77,383

$
80,481

 
$
63,668

$
69,219

Fair value hedge gains and losses
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended
June 30, 2011 (in millions)
Derivatives
Hedged items
Total income
statement impact
 

Hedge
ineffectiveness(d)

  Excluded
    components(e)
Contract type
 
 
 
 
 
 
 
Interest rate(a)
$
166

 
$
(102
)
$
64

 
$
(17
)
$
81

Foreign exchange(b)
(1,239
)
(f) 
1,401

162

 
—

162

Commodity(c)
(401
)
 
(97
)
(498
)
 
3

(501
)
Total
$
(1,474
)
 
$
1,202

$
(272
)
 
$
(14
)
$
(258
)
 
 
 
 
 
 
 
 
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended
June 30, 2010 (in millions)
Derivatives
Hedged items

Total income
statement impact

 

Hedge
ineffectiveness(d)


  Excluded
    components(e)

Contract type
 
 
 
 
 
 
 
Interest rate(a)
$
1,345

 
$
(1,100
)
$
245

 
$
96

$
149

Foreign exchange(b)
3,841

(f) 
(3,865
)
(24
)
 
—

(24
)
Commodity(c)
139

 
(332
)
(193
)
 
—

(193
)
Total
$
5,325

 
$
(5,297
)
$
28

 
$
96

$
(68
)

 
Gains/(losses) recorded in income
 
Income statement impact due to:
Six months ended
June 30, 2011 (in millions)
Derivatives
Hedged items
Total income
statement impact
 

Hedge
ineffectiveness(d)

  Excluded
    components(e)
Contract type
 
 
 
 
 
 
 
Interest rate(a)
$
(552
)
 
$
698

$
146

 
$
(26
)
$
172

Foreign exchange(b)
(4,445
)
(f) 
4,525

80

 
—

80

Commodity(c)
(474
)
 
336

(138
)
 
2

(140
)
Total
$
(5,471
)
 
$
5,559

$
88

 
$
(24
)
$
112

 
 
 
 
 
 
 
 
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Six months ended
June 30, 2010 (in millions)
Derivatives
Hedged items

Total income
statement impact

 

Hedge
ineffectiveness(d)


  Excluded
    components(e)

Contract type
 
 
 
 
 
 
 
Interest rate(a)
$
1,977

 
$
(1,598
)
$
379

 
$
124

$
255

Foreign exchange(b)
5,488

(f) 
(5,522
)
(34
)
 
—

(34
)
Commodity(c)
(316
)
 
64

(252
)
 
—

(252
)
Total
$
7,149

 
$
(7,056
)
$
93

 
$
124

$
(31
)
(a)
Primarily consists of hedges of the benchmark (e.g., London Interbank Offered Rate (“LIBOR”)) interest rate risk of fixed-rate long-term debt and AFS securities. Gains and losses were recorded in net interest income.
(b)
Primarily consists of hedges of the foreign currency risk of long-term debt and AFS securities for changes in spot foreign currency rates. Gains and losses related to the derivatives and the hedged items, due to changes in spot foreign currency rates, were recorded in principal transactions revenue.
(c)
Consists of overall fair value hedges of certain commodities inventories. Gains and losses were recorded in principal transactions revenue.
(d)
Hedge ineffectiveness is the amount by which the gain or loss on the designated derivative instrument does not exactly offset the gain or loss on the hedged item attributable to the hedged risk.
(e)
Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on foreign exchange forward contracts. Amounts related to excluded components are recorded in current-period income.
(f)
Included $(1.8) billion and $3.8 billion for the three months ended June 30, 2011 and 2010, respectively, and $(5.0) billion and $5.6 billion for the six months ended June 30, 2011 and 2010, respectively, of revenue related to certain foreign exchange trading derivatives designated as fair value hedging instruments.
Cash flow hedge gains and losses
 
Gains/(losses) recorded in income and other comprehensive income (“OCI”)/(loss)(c)
Three months ended
June 30, 2011 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(d)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
75

$
6

$
81

$
(103
)
$
(178
)
Foreign exchange(b)
(7
)
—

(7
)
(40
)
(33
)
Total
$
68

$
6

$
74

$
(143
)
$
(211
)
 
Gains/(losses) recorded in income and other comprehensive income/(loss)(c)
Three months ended
June 30, 2010 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(d)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
33

$
8

$
41

$
98

$
65

Foreign exchange(b)
(23
)
(3
)
(26
)
47

70

Total
$
10

$
5

$
15

$
145

$
135


 
Gains/(losses) recorded in income and other comprehensive income/(loss)(c)
Six months ended June 30, 2011 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(d)
Total income statement impact
Derivatives - effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
169

$
9

$
178

$
(134
)
$
(303
)
Foreign exchange(b)
15

—

15

(22
)
(37
)
Total
$
184

$
9

$
193

$
(156
)
$
(340
)

 
Gains/(losses) recorded in income and other comprehensive income/(loss)(c)
Six months ended June 30, 2010 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(d)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
82

$
11

$
93

$
349

$
267

Foreign exchange(b)
(75
)
(3
)
(78
)
(65
)
10

Total
$
7

$
8

$
15

$
284

$
277

(a)
Primarily consists of benchmark interest rate hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losses were recorded in net interest income.
(b)
Primarily consists of hedges of the foreign currency risk of non-U.S. dollar-denominated revenue and expense. The income statement classification of gains and losses follows the hedged item – primarily net interest income, compensation expense and other expense.
(c)
The Firm did not experience any forecasted transactions that failed to occur for the three and six months ended June 30, 2011, respectively. During the three and six months ended June 30, 2010, the Firm reclassified a $25 million loss from accumulated other comprehensive income (“AOCI”) to earnings because the Firm determined that it was probable that forecasted interest payment cash flows related to certain wholesale deposits would not occur.
(d)
Hedge ineffectiveness is the amount by which the cumulative gain or loss on the designated derivative instrument exceeds the present value of the cumulative expected change in cash flows on the hedged item attributable to the hedged risk.
Net investment hedge gains and losses
 
Gains/(losses) recorded in income and other comprehensive income/(loss)
 
2011
 
2010
Three months ended June 30,
(in millions)
Excluded components recorded directly
in income(a)
Effective portion
recorded in OCI
 
Excluded components recorded directly
in income(a)
Effective portion
recorded in OCI
Contract type
 
 
 
 
 
Foreign exchange derivatives
$
(74
)
$
(383
)
 
$
(32
)
$
429

Foreign currency denominated debt
—

—

 
—

2

Total
$
(74
)
$
(383
)
 
$
(32
)
$
431


 
Gains/(losses) recorded in income and other comprehensive income/(loss)
 
2011
 
2010
Six months ended June 30,
(in millions)
Excluded components recorded directly
in income(a)
Effective portion
recorded in OCI
 
Excluded components recorded directly
in income(a)
Effective portion
recorded in OCI
Contract type
 
 
 
 
 
Foreign exchange derivatives
$
(145
)
$
(773
)
 
$
(73
)
$
714

Foreign currency denominated debt
—

—

 
—

43

Total
$
(145
)
$
(773
)
 
$
(73
)
$
757

(a)
Certain components of hedging derivatives are permitted to be excluded from the assessment of hedge effectiveness, such as forward points on foreign exchange forward contracts. Amounts related to excluded components are recorded in current-period income. There was no ineffectiveness for net investment hedge accounting relationships during the three and six months ended June 30, 2011 and 2010.
Risk management derivatives gains and losses (not designated as hedging instruments)
 
Derivatives gains/(losses) recorded in income
 
Three months ended June 30,
 
Six months ended June 30,
(in millions)
2011

2010

 
2011

2010

Contract type
 
 
 
 
 
Interest rate(a)
$
1,486

$
3,662

 
$
1,562

$
3,802

Credit(b)
(5
)
60

 
(63
)
(59
)
Foreign exchange(c)
(78
)
1

 
(98
)
(20
)
Commodity(b)
11

(24
)
 
—

(47
)
Total
$
1,414

$
3,699

 
$
1,401

$
3,676

(a)
Gains and losses were recorded in principal transactions revenue, mortgage fees and related income, and net interest income.
(b)
Gains and losses were recorded in principal transactions revenue.
(c)
Gains and losses were recorded in principal transactions revenue and net interest income.
Trading derivative gains and losses
 
Gains/(losses) recorded in principal transactions revenue
 
Three months ended June 30,
 
Six months ended June 30,
(in millions)
2011

2010

 
2011

2010

Type of instrument
 
 
 
 
 
Interest rate
$
(353
)
$
(37
)
 
$
13

$
70

Credit
745

1,287

 
1,954

3,412

Foreign exchange(a)
229

424

 
831

1,051

Equity
743

85

 
1,571

907

Commodity
1,219

20

 
1,393

433

Total
$
2,583

$
1,779

 
$
5,762

$
5,873

(a)
In 2010, the reporting of trading gains and losses was enhanced to include trading gains and losses related to certain trading derivatives designated as fair value hedging instruments. Prior-period amounts have been revised to conform to the current presentation.
Current credit risk of derivative receivables and liquidity risk of derivative payables
 
Derivative receivables
 
Derivative payables
(in millions)
June 30, 2011

December 31, 2010

 
June 30, 2011

December 31, 2010

Gross derivative fair value
$
1,392,372

$
1,529,412

 
$
1,347,276

$
1,485,109

Netting adjustment – offsetting receivables/payables(a)
(1,248,243
)
(1,376,969
)
 
(1,248,243
)
(1,376,969
)
Netting adjustment – cash collateral received/paid(a)
(66,746
)
(71,962
)
 
(35,365
)
(38,921
)
Carrying value on Consolidated Balance Sheets
$
77,383

$
80,481

 
$
63,668

$
69,219


 
 
Collateral held
 
Collateral transferred
(in billions)
 
June 30, 2011

 
December 31, 2010

 
June 30, 2011

 
December 31, 2010

Netting adjustment for cash collateral(a)
 
$
66.7

 
$
72.0

 
$
35.4

 
$
38.9

Liquid securities and other cash collateral(b)
 
16.5

 
16.5

 
12.5

 
10.9

Additional liquid securities and cash collateral(c)
 
22.3

 
18.0

 
10.0

 
8.5

Total collateral for derivative transactions
 
$
105.5

 
$
106.5

 
$
57.9

 
$
58.3

(a)
As permitted under U.S. GAAP, the Firm has elected to net cash collateral received and paid together with the related derivative receivables and derivative payables when a legally enforceable master netting agreement exists. 
(b)
Represents cash collateral received and paid that is not subject to a legally enforceable master netting agreement, and liquid securities collateral held and transferred.
(c)
Represents liquid securities and cash collateral held and transferred at the initiation of derivative transactions, which is available as security against potential exposure that could arise should the fair value of the transactions move, as well as collateral held and transferred related to contracts that have non-daily call frequency for collateral to be posted, and collateral that the Firm or a counterparty has agreed to return but has not yet settled as of the reporting date. These amounts were not netted against the derivative receivables and payables in the tables above, because, at an individual counterparty level, the collateral exceeded the fair value exposure at both June 30, 2011, and December 31, 2010.

Credit Derivatives Table
 
Maximum payout/Notional amount
June 30, 2011
Protection sold
Protection purchased with identical underlyings(b)
Net protection (sold)/purchased(c)
Other protection purchased(d)
(in millions)
Credit derivatives
 
 
 
 
Credit default swaps
$
(2,972,180
)
$
2,912,446

$
(59,734
)
$
38,797

Other credit derivatives(a)
(120,733
)
36,278

(84,455
)
25,002

Total credit derivatives
(3,092,913
)
2,948,724

(144,189
)
63,799

Credit-related notes
(1,544
)
—

(1,544
)
4,009

Total
$
(3,094,457
)
$
2,948,724

$
(145,733
)
$
67,808

 
 
 
 
 
 
Maximum payout/Notional amount
December 31, 2010
Protection sold
Protection purchased with identical underlyings(b)
Net protection (sold)/purchased(c)
Other protection purchased(d)
(in millions)
Credit derivatives
 
 
 
 
Credit default swaps
$
(2,659,240
)
$
2,652,313

$
(6,927
)
$
32,867

Other credit derivatives(a)
(93,776
)
10,016

(83,760
)
24,234

Total credit derivatives
(2,753,016
)
2,662,329

(90,687
)
57,101

Credit-related notes
(2,008
)
—

(2,008
)
3,327

Total
$
(2,755,024
)
$
2,662,329

$
(92,695
)
$
60,428

(a)
Primarily consists of total return swaps and credit default swap options.
(b)
Represents the total notional amount of protection purchased where the underlying reference instrument is identical to the reference instrument on protection sold; the notional amount of protection purchased for each individual identical underlying reference instrument may be greater or lower than the notional amount of protection sold.
(c)
Does not take into account the fair value of the reference obligation at the time of settlement, which would generally reduce the amount the seller of protection pays to the buyer of protection in determining settlement value.
(d)
Represents protection purchased by the Firm through single-name and index credit default swap or credit-related notes.
Protection sold - credit derivatives and credit-related notes ratings/maturity profile
June 30, 2011 (in millions)
<1 year
1–5 years
>5 years
Total
notional amount
Fair value(b)
Risk rating of reference entity
 
 
 
 
 
Investment-grade
$
(218,669
)
$
(1,450,354
)
$
(418,820
)
$
(2,087,843
)
$
(25,284
)
Noninvestment-grade
(190,728
)
(658,364
)
(157,522
)
(1,006,614
)
(52,238
)
Total
$
(409,397
)
$
(2,108,718
)
$
(576,342
)
$
(3,094,457
)
$
(77,522
)
December 31, 2010 (in millions)
<1 year
1–5 years
>5 years
Total
notional amount
Fair value(b)
Risk rating of reference entity
 
 
 
 
 
Investment-grade
$
(175,618
)
$
(1,194,695
)
$
(336,309
)
$
(1,706,622
)
$
(17,261
)
Noninvestment-grade
(148,434
)
(702,638
)
(197,330
)
(1,048,402
)
(59,939
)
Total
$
(324,052
)
$
(1,897,333
)
$
(533,639
)
$
(2,755,024
)
$
(77,200
)
(a)
The ratings scale is based on the Firm’s internal ratings, which generally correspond to ratings as defined by S&P and Moody’s.
(b)
Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm.