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Derivative instruments
 9 Months Ended
Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative instruments
Derivative instruments
JPMorgan Chase makes markets in derivatives for customers and also uses derivatives to hedge or manage its own risk exposures. For a further discussion of the Firm’s use of and accounting policies regarding derivative instruments, see Note 6 of JPMorgan Chase’s 2014 Annual Report.
The Firm’s disclosures are based on the accounting treatment and purpose of these derivatives. A limited number of the Firm’s derivatives are designated in hedge accounting relationships and are disclosed according to the type of hedge (fair value hedge, cash flow hedge, or net investment hedge). Derivatives not designated in hedge accounting relationships include certain derivatives that are used to manage certain risks associated with specified assets or liabilities (“specified risk management” positions) as well as derivatives used in the Firm’s market-making businesses or for other purposes.

The following table outlines the Firm’s primary uses of derivatives and the related hedge accounting designation or disclosure category.
Type of Derivative
Use of Derivative
Designation and disclosure
Affected
segment or unit
10-Q page reference
Manage specifically identified risk exposures in qualifying hedge accounting relationships:
 
 
 
◦ Interest rate
Hedge fixed rate assets and liabilities
Fair value hedge
Corporate
113–114
◦ Interest rate
Hedge floating-rate assets and liabilities
Cash flow hedge
Corporate
114–115
◦
 Foreign exchange
Hedge foreign currency-denominated assets and liabilities
Fair value hedge
Corporate
113–114

◦
 Foreign exchange
Hedge forecasted revenue and expense
Cash flow hedge
Corporate
114–115

◦
 Foreign exchange
Hedge the value of the Firm’s investments in non-U.S. subsidiaries
Net investment hedge
Corporate
116
◦
 Commodity
Hedge commodity inventory
Fair value hedge
CIB
113–114

Manage specifically identified risk exposures not designated in qualifying hedge accounting relationships:
 
 
 
◦
 Interest rate
Manage the risk of the mortgage pipeline, warehouse loans and MSRs
Specified risk management
CCB
116
◦
 Credit
Manage the credit risk of wholesale lending exposures
Specified risk management
CIB
116
◦
 Commodity
Manage the risk of certain commodities-related contracts and investments
Specified risk management
CIB
116
◦
 Interest rate and foreign exchange
Manage the risk of certain other specified assets and liabilities
Specified risk management
Corporate
116
Market-making derivatives and other activities:
 
 
 
◦
 Various
Market-making and related risk management
Market-making and other
CIB
116
◦
 Various
Other derivatives
Market-making and other
CIB, Corporate
116

Notional amount of derivative contracts
The following table summarizes the notional amount of derivative contracts outstanding as of September 30, 2015, and December 31, 2014.
 
Notional amounts(b)
(in billions)
September 30, 2015
December 31, 2014
Interest rate contracts
 
 
Swaps
$
24,058

$
29,734

Futures and forwards
5,377

10,189

Written options
3,689

3,903

Purchased options
4,170

4,259

Total interest rate contracts
37,294

48,085

Credit derivatives(a)
3,503

4,249

Foreign exchange contracts
 
 
Cross-currency swaps
3,052

3,346

Spot, futures and forwards
4,976

4,669

Written options
759

790

Purchased options
740

780

Total foreign exchange contracts
9,527

9,585

Equity contracts
 
 
Swaps
227

206

Futures and forwards
45

50

Written options
457

432

Purchased options
388

375

Total equity contracts
1,117

1,063

Commodity contracts
 
 
Swaps
103

126

Spot, futures and forwards
132

193

Written options
172

181

Purchased options
170

180

Total commodity contracts
577

680

Total derivative notional amounts
$
52,018

$
63,662

(a)
For more information on volumes and types of credit derivative contracts, see the Credit derivatives discussion on pages 117–118 of this Note.
(b)
Represents the sum of gross long and gross short third-party notional derivative contracts.
While the notional amounts disclosed above give an indication of the volume of the Firm’s derivatives activity, the notional amounts significantly exceed, in the Firm’s view, the possible losses that could arise from such transactions. For most derivative transactions, the notional amount is not exchanged; it is used simply as a reference to calculate payments.
Impact of derivatives on the Consolidated Balance Sheets
The following table summarizes information on derivative receivables and payables (before and after netting adjustments) that are reflected on the Firm’s Consolidated balance sheets as of September 30, 2015, and December 31, 2014, by accounting designation (e.g., whether the derivatives were designated in qualifying hedge accounting relationships or not) and contract type.
Free-standing derivative receivables and payables(a)
 
 
 
 
 
 
 
 
 
 
Gross derivative receivables
 
 
 
Gross derivative payables
 
 
September 30, 2015
(in millions)
Not designated as hedges
 
Designated as hedges
Total derivative receivables
 
Net derivative receivables(b)
 
Not designated as hedges
 
Designated
as hedges
Total derivative payables
 
Net derivative payables(b)
Trading assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
$
733,909

 
$
5,042

$
738,951

 
$
29,116

 
$
699,048

 
$
2,791

$
701,839

 
$
10,725

Credit
54,409

 
—

54,409

 
1,724

 
53,111

 
—

53,111

 
1,646

Foreign exchange
185,015

 
1,534

186,549

 
21,116

 
201,298

 
1,155

202,453

 
22,044

Equity
46,727

 
—

46,727

 
7,490

 
47,549

 
—

47,549

 
9,006

Commodity
27,452

 
1,008

28,460

 
9,222

 
32,542

 
18

32,560

 
13,719

Total fair value of trading assets and liabilities
$
1,047,512

 
$
7,584

$
1,055,096

 
$
68,668

 
$
1,033,548

 
$
3,964

$
1,037,512

 
$
57,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross derivative receivables
 
 
 
Gross derivative payables
 
 
December 31, 2014
(in millions)
Not designated as hedges
 
Designated as hedges
Total derivative receivables
 
Net derivative receivables(b)
 
Not designated as hedges
 
Designated
as hedges
Total derivative payables
 
Net derivative payables(b)
Trading assets and liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
$
944,885

 
$
5,372

$
950,257

 
$
33,725

 
$
915,368

 
$
3,011

$
918,379

 
$
17,745

Credit
76,842

 
—

76,842

 
1,838

 
75,895

 
—

75,895

 
1,593

Foreign exchange
211,537

 
3,650

215,187

 
21,253

 
223,988

 
626

224,614

 
22,970

Equity
42,489

 
—

42,489

 
8,177

 
46,262

 
—

46,262

 
11,740

Commodity
43,151

 
502

43,653

 
13,982

 
45,455

 
168

45,623

 
17,068

Total fair value of trading assets and liabilities
$
1,318,904

 
$
9,524

$
1,328,428

 
$
78,975

 
$
1,306,968

 
$
3,805

$
1,310,773

 
$
71,116


(a)
Balances exclude structured notes for which the fair value option has been elected. See Note 4 for further information.
(b)
As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral receivables and payables when a legally enforceable master netting agreement exists.
The following table presents, as of September 30, 2015, and December 31, 2014, the gross and net derivative receivables by contract and settlement type. Derivative receivables have been netted on the Consolidated balance sheets against derivative payables and cash collateral payables to the same counterparty with respect to derivative contracts for which the Firm has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, the receivables are not eligible under U.S. GAAP for netting on the Consolidated balance sheets, and are shown separately in the table below.
 
September 30, 2015
 
December 31, 2014
(in millions)
Gross derivative receivables
Amounts netted on the Consolidated balance sheets
Net derivative receivables
 
Gross derivative receivables
 
Amounts netted
on the Consolidated balance sheets
Net derivative receivables
U.S. GAAP nettable derivative receivables
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
OTC
$
455,022

$
(432,456
)
 
$
22,566

 
$
542,107

 
$
(514,914
)
 
$
27,193

OTC–cleared
277,403

(277,379
)
 
24

 
401,656

 
(401,618
)
 
38

Exchange-traded(a)
—

—

 
—

 
—

 
—

 
—

Total interest rate contracts
732,425

(709,835
)
 
22,590

 
943,763

 
(916,532
)
 
27,231

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
44,739

(44,680
)
 
59

 
66,636

 
(65,720
)
 
916

OTC–cleared
8,020

(8,005
)
 
15

 
9,320

 
(9,284
)
 
36

Total credit contracts
52,759

(52,685
)
 
74

 
75,956

 
(75,004
)
 
952

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
181,104

(165,157
)
 
15,947

 
208,803

 
(193,900
)
 
14,903

OTC–cleared
276

(276
)
 
—

 
36

 
(34
)
 
2

Exchange-traded(a)
—

—

 
—

 
—

 
—

 
—

Total foreign exchange contracts
181,380

(165,433
)
 
15,947

 
208,839

 
(193,934
)
 
14,905

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
26,509

(25,732
)
 
777

 
23,258

 
(22,826
)
 
432

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
17,579

(13,505
)
 
4,074

 
13,840

 
(11,486
)
 
2,354

Total equity contracts
44,088

(39,237
)
 
4,851

 
37,098

 
(34,312
)
 
2,786

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
14,610

(6,644
)
 
7,966

 
22,555

 
(14,327
)
 
8,228

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
12,844

(12,594
)
 
250

 
19,500

 
(15,344
)
 
4,156

Total commodity contracts
27,454

(19,238
)
 
8,216

 
42,055

 
(29,671
)
 
12,384

Derivative receivables with appropriate legal opinion
$
1,038,106

$
(986,428
)
(b) 
$
51,678

 
$
1,307,711

 
$
(1,249,453
)
(b) 
$
58,258

Derivative receivables where an appropriate legal opinion has not been either sought or obtained
16,990

 
 
16,990

 
20,717

 
 
 
20,717

Total derivative receivables recognized on the Consolidated balance sheets
$
1,055,096

 
 
$
68,668

 
$
1,328,428

 
 
 
$
78,975

(a)
Exchange-traded derivative amounts that relate to futures contracts are settled daily.
(b)
Included cash collateral netted of $74.3 billion and $74.0 billion at September 30, 2015, and December 31, 2014, respectively.
The following table presents, as of September 30, 2015, and December 31, 2014, the gross and net derivative payables by contract and settlement type. Derivative payables have been netted on the Consolidated balance sheets against derivative receivables and cash collateral receivables from the same counterparty with respect to derivative contracts for which the Firm has obtained an appropriate legal opinion with respect to the master netting agreement. Where such a legal opinion has not been either sought or obtained, the payables are not eligible under U.S. GAAP for netting on the Consolidated balance sheets, and are shown separately in the table below.
 
September 30, 2015
 
December 31, 2014
(in millions)
Gross derivative payables
Amounts netted on the Consolidated balance sheets
Net derivative payables
 
Gross derivative payables
 
Amounts netted
on the Consolidated balance sheets
Net derivative payables
U.S. GAAP nettable derivative payables
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
OTC
$
431,744

$
(422,367
)
 
$
9,377

 
$
515,904

 
$
(503,384
)
 
$
12,520

OTC–cleared
268,798

(268,747
)
 
51

 
398,518

 
(397,250
)
 
1,268

Exchange-traded(a)
—

—

 
—

 
—

 
—

 
—

Total interest rate contracts
700,542

(691,114
)
 
9,428

 
914,422

 
(900,634
)
 
13,788

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
45,435

(44,220
)
 
1,215

 
65,432

 
(64,904
)
 
528

OTC–cleared
7,245

(7,245
)
 
—

 
9,398

 
(9,398
)
 
—

Total credit contracts
52,680

(51,465
)
 
1,215

 
74,830

 
(74,302
)
 
528

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
196,762

(180,048
)
 
16,714

 
217,998

 
(201,578
)
 
16,420

OTC–cleared
362

(361
)
 
1

 
66

 
(66
)
 
—

Exchange-traded(a)
—

—

 
—

 
—

 
—

 
—

Total foreign exchange contracts
197,124

(180,409
)
 
16,715

 
218,064

 
(201,644
)
 
16,420

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
28,605

(25,038
)
 
3,567

 
27,908

 
(23,036
)
 
4,872

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
15,065

(13,505
)
 
1,560

 
12,864

 
(11,486
)
 
1,378

Total equity contracts
43,670

(38,543
)
 
5,127

 
40,772

 
(34,522
)
 
6,250

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
17,490

(6,247
)
 
11,243

 
25,129

 
(13,211
)
 
11,918

OTC–cleared
—

—

 
—

 
—

 
—

 
—

Exchange-traded(a)
12,655

(12,594
)
 
61

 
18,486

 
(15,344
)
 
3,142

Total commodity contracts
30,145

(18,841
)
 
11,304

 
43,615

 
(28,555
)
 
15,060

Derivative payables with appropriate legal opinions
$
1,024,161

$
(980,372
)
(b) 
$
43,789

 
$
1,291,703

 
$
(1,239,657
)
(b) 
$
52,046

Derivative payables where an appropriate legal opinion has not been either sought or obtained
13,351

 
 
13,351

 
19,070

 
 
 
19,070

Total derivative payables recognized on the Consolidated balance sheets
$
1,037,512

 
 
$
57,140

 
$
1,310,773

 
 
 
$
71,116

(a)
Exchange-traded derivative balances that relate to futures contracts are settled daily.
(b)
Included cash collateral netted of $68.2 billion and $64.2 billion related to OTC and OTC-cleared derivatives at September 30, 2015, and December 31, 2014, respectively.
In addition to the cash collateral received and transferred that is presented on a net basis with net derivative receivables and payables, the Firm receives and transfers additional collateral (financial instruments and cash). These amounts mitigate counterparty credit risk associated with the Firm’s derivative instruments but are not eligible for net presentation, because (a) the collateral consists of non-cash financial instruments (generally U.S. government and agency securities and other G7 government bonds), (b) the amount of collateral held or transferred exceeds the fair value exposure, at the individual counterparty level, as of the date presented, or (c) the collateral relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained.

The following tables present information regarding certain financial instrument collateral received and transferred as of September 30, 2015, and December 31, 2014, that is not eligible for net presentation under U.S. GAAP. The collateral included in these tables relates only to the derivative instruments for which appropriate legal opinions have been obtained; excluded are (i) additional collateral that exceeds the fair value exposure and (ii) all collateral related to derivative instruments where an appropriate legal opinion has not been either sought or obtained.
Derivative receivables collateral
 
 
 
 
 
 
September 30, 2015
 
December 31, 2014
(in millions)
Net derivative receivables
Collateral not nettable on the Consolidated balance sheets
 
Net exposure
 
Net derivative receivables
Collateral not nettable on the Consolidated balance sheets
 
Net exposure
Derivative receivables with appropriate legal opinions
$
51,678

$
(15,706
)
(a) 
$
35,972

 
$
58,258

$
(16,194
)
(a) 
$
42,064

Derivative payables collateral(b)
 
 
 
 
 
 
September 30, 2015
 
December 31, 2014
(in millions)
Net derivative payables
Collateral not nettable on the Consolidated balance sheets
 
Net amount(c)
 
Net derivative payables
Collateral not nettable on the Consolidated balance sheets
 
Net amount(c)
Derivative payables with appropriate legal opinions
$
43,789

$
(8,424
)
(a) 
$
35,365

 
$
52,046

$
(10,505
)
(a) 
$
41,541

(a)
Represents liquid security collateral as well as cash collateral held at third party custodians. For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with that counterparty.
(b)
Derivative payables collateral relates only to OTC and OTC-cleared derivative instruments. Amounts exclude collateral transferred related to exchange-traded derivative instruments.
(c)
Net amount represents exposure of counterparties to the Firm.
Liquidity risk and credit-related contingent features
For a more detailed discussion of liquidity risk and credit-related contingent features related to the Firm’s derivative contracts, see Note 6 of JPMorgan Chase’s 2014 Annual Report.
The following table shows the aggregate fair value of net derivative payables related to OTC and OTC-cleared derivatives that contain contingent collateral or termination features that may be triggered upon a ratings downgrade, and the associated collateral the Firm has posted in the normal course of business, at September 30, 2015, and December 31, 2014.
OTC and OTC-cleared derivative payables containing downgrade triggers
(in millions)
September 30, 2015
December 31, 2014
Aggregate fair value of net derivative payables
$
24,822

$
32,303

Collateral posted
22,858

27,585

The following table shows the impact of a single-notch and two-notch downgrade of the long-term issuer ratings of JPMorgan Chase & Co. and its subsidiaries, predominantly JPMorgan Chase Bank, National Association (“JPMorgan Chase Bank, N.A.”), at September 30, 2015 and December 31, 2014, related to OTC and OTC-cleared derivative contracts with contingent collateral or termination features that may be triggered upon a ratings downgrade. Derivatives contracts generally require additional collateral to be posted or terminations to be triggered when the predefined threshold rating is breached. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another major rating agency will generally not result in additional collateral, except in certain instances in which additional initial margin may be required upon a ratings downgrade, or in termination payments requirements. The liquidity impact in the table is calculated based upon a downgrade below the lowest current rating of the rating agencies referred to in the derivative contract.
Liquidity impact of downgrade triggers on OTC and
OTC-cleared derivatives
 
 
 
 
 
 
September 30, 2015
 
December 31, 2014
(in millions)
Single-notch downgrade
Two-notch downgrade
 
Single-notch downgrade
Two-notch downgrade
Amount of additional collateral to be posted upon downgrade(a)
$
895

$
3,164

 
$
1,046

$
3,331

Amount required to settle contracts with termination triggers upon downgrade(b)
287

1,141

 
366

1,388

(a)
Includes the additional collateral to be posted for initial margin.
(b)
Amounts represent fair values of derivative payables, and do not reflect collateral posted.
Derivatives executed in contemplation of a sale of the underlying financial asset
In certain instances the Firm enters into transactions where it transfers financial assets but maintains the economic exposure to the transferred assets by entering into a derivative with the same counterparty in contemplation of the initial transfer. The Firm generally accounts for such transfers as collateralized financing transactions as described in Note 12, but in limited circumstances they may qualify to be accounted for as a sale and a derivative under U.S. GAAP. The amount of such transfers accounted for as a sale where the associated derivative was outstanding at September 30, 2015 was not material.
Impact of derivatives on the Consolidated statements of income
The following tables provide information related to gains and losses recorded on derivatives based on their hedge accounting designation or purpose.
Fair value hedge gains and losses
The following tables present derivative instruments, by contract type, used in fair value hedge accounting relationships, as well as pretax gains/(losses) recorded on such derivatives and the related hedged items for the three and nine months ended September 30, 2015 and 2014, respectively.
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended September 30, 2015 (in millions)
Derivatives
Hedged items
Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
1,298

$
(1,071
)
$
227

 
$
8

$
219

Foreign exchange(b)
1,012

(998
)
14

 
—

14

Commodity(c)
303

(271
)
32

 
(3
)
35

Total
$
2,613

$
(2,340
)
$
273

 
$
5

$
268

 
 
 
 
 
 
 
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Three months ended September 30, 2014 (in millions)
Derivatives

Hedged items

Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
(286
)
$
651

$
365

 
$
27

$
338

Foreign exchange(b)
6,008

(6,052
)
(44
)
 
—

(44
)
Commodity(c)
284

(236
)
48

 
10

38

Total
$
6,006

$
(5,637
)
$
369

 
$
37

$
332

 
Gains/(losses) recorded in income
 
Income statement impact due to:
Nine months ended September 30, 2015 (in millions)
Derivatives
Hedged items
Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
363

$
390

$
753

 
$
6

$
747

Foreign exchange(b)
5,369

(5,360
)
9

 
—

9

Commodity(c)
867

(874
)
(7
)
 
(14
)
7

Total
$
6,599

$
(5,844
)
$
755

 
$
(8
)
$
763

 
 
 
 
 
 
 
 
Gains/(losses) recorded in income
 
Income statement impact due to:
Nine months ended September 30, 2014 (in millions)
Derivatives

Hedged items

Total income statement impact
 
Hedge ineffectiveness(d)
Excluded components(e)
Contract type
 
 
 
 
 
 
Interest rate(a)
$
1,035

$
(17
)
$
1,018

 
$
99

$
919

Foreign exchange(b)
5,222

(5,421
)
(199
)
 
—

(199
)
Commodity(c)
(97
)
278

181

 
38

143

Total
$
6,160

$
(5,160
)
$
1,000

 
$
137

$
863

(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 foreign currency rates, were recorded in principal transactions revenue and net interest income.
(c)
Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or market (market approximates fair value). 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)
The assessment of hedge effectiveness excludes certain components of the changes in fair values of the derivatives and hedged items such as forward points on foreign exchange forward contracts and time values.

Cash flow hedge gains and losses
The following tables present derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the pretax gains/(losses) recorded on such derivatives, for the three and nine months ended September 30, 2015 and 2014, respectively.
 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended September 30, 2015 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
14

$
—

$
14

$
(70
)
$
(84
)
Foreign exchange(b)
(19
)
—

(19
)
(105
)
(86
)
Total
$
(5
)
$
—

$
(5
)
$
(175
)
$
(170
)

 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended September 30, 2014 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
(12
)
$
—

$
(12
)
$
26

$
38

Foreign exchange(b)
43

—

43

(92
)
(135
)
Total
$
31

$
—

$
31

$
(66
)
$
(97
)
 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Nine months ended September 30, 2015 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
(113
)
$
—

$
(113
)
$
(90
)
$
23

Foreign exchange(b)
(74
)
—

(74
)
(14
)
60

Total
$
(187
)
$
—

$
(187
)
$
(104
)
$
83


 
Gains/(losses) recorded in income and other comprehensive income/(loss)
Nine months ended September 30, 2014 (in millions)
Derivatives – effective portion reclassified from AOCI to income
Hedge ineffectiveness recorded directly in income(c)
Total income statement impact
Derivatives – effective portion recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
 
 
Interest rate(a)
$
(48
)
$
—

$
(48
)
$
160

$
208

Foreign exchange(b)
81

—

81

(11
)
(92
)
Total
$
33

$
—

$
33

$
149

$
116

(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, and for forecasted transactions that the Firm determined during the nine months ended September 30, 2015, were probable of not occurring, in other 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 noninterest revenue and compensation expense.
(c)
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.
In the first quarter of 2015, the Firm reclassified approximately $150 million of net losses from accumulated other comprehensive income (“AOCI”) to other income because the Firm determined that it was probable that the forecasted interest payment cash flows would not occur as a result of the planned reduction in wholesale non-operating deposits. The Firm did not experience any forecasted transactions that failed to occur for the three months ended September 30, 2015 and 2014, and nine months ended September 30, 2014.
Over the next 12 months, the Firm expects that $11 million (after-tax) of net gains recorded in AOCI at September 30, 2015, related to cash flow hedges will be recognized in income. For terminated cash flow hedges, the maximum length of time over which forecasted transactions are remaining is approximately 8 years. For open cash flow hedges, the maximum length of time over which forecasted transactions are hedged is approximately 2 years. The Firm’s longer-dated forecasted transactions relate to core lending and borrowing activities.
Net investment hedge gains and losses
The following table presents hedging instruments, by contract type, that were used in net investment hedge accounting relationships, and the pretax gains/(losses) recorded on such instruments for the three and nine months ended September 30, 2015 and 2014.
 
Gains/(losses) recorded in income and
other comprehensive income/(loss)
 
2015
 
2014
Three months ended September 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
Foreign exchange derivatives
 
$
(103
)
 
$
908

 
 
$
(114
)
 
$
1,185

 
Gains/(losses) recorded in income and
other comprehensive income/(loss)
 
2015
 
2014
Nine months ended September 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
Foreign exchange derivatives
 
$
(292
)
 
$
1,651

 
 
$
(341
)
 
$
823

(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 other income. The Firm measures the ineffectiveness of net investment hedge accounting relationships based on changes in spot foreign currency rates, and therefore there was no significant ineffectiveness for net investment hedge accounting relationships during the three and nine months ended September 30, 2015 and 2014.
Gains and losses on derivatives used for specified risk management purposes
The following table presents pretax gains/(losses) recorded on a limited number of derivatives, not designated in hedge accounting relationships, that are used to manage risks associated with certain specified assets and liabilities, including certain risks arising from the mortgage pipeline, warehouse loans, MSRs, wholesale lending exposures, AFS securities, foreign currency-denominated liabilities, and commodities-related contracts and investments.
 
Derivatives gains/(losses)
recorded in income
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
2015
2014
 
2015
2014
Contract type
 
 
 
 
 
Interest rate(a)
$
665

$
321

 
$
785

$
1,428

Credit(b)
76

1

 
52

(40
)
Foreign exchange(c)
26

(2
)
 
21

(5
)
Commodity(d)
—

16

 
(13
)
178

Total
$
767

$
336

 
$
845

$
1,561


(a)
Primarily represents interest rate derivatives used to hedge the interest rate risk inherent in the mortgage pipeline, warehouse loans and MSRs, as well as written commitments to originate warehouse loans. Gains and losses were recorded predominantly in mortgage fees and related income.
(b)
Relates to credit derivatives used to mitigate credit risk associated with lending exposures in the Firm’s wholesale businesses. These derivatives do not include credit derivatives used to mitigate counterparty credit risk arising from derivative receivables, which is included in gains and losses on derivatives related to market-making activities and other derivatives. Gains and losses were recorded in principal transactions revenue.
(c)
Primarily relates to hedges of the foreign exchange risk of specified foreign currency-denominated assets and liabilities. Gains and losses were recorded in principal transactions revenue.
(d)
Primarily relates to commodity derivatives used to mitigate energy price risk associated with energy-related contracts and investments. Gains and losses were recorded in principal transactions revenue.

Gains and losses on derivatives related to market-making activities and other derivatives
The Firm makes markets in derivatives in order to meet the needs of customers and uses derivatives to manage certain risks associated with net open risk positions from the Firm’s market-making activities, including the counterparty credit risk arising from derivative receivables. All derivatives not included in the hedge accounting or specified risk management categories above are included in this category. Gains and losses on these derivatives are primarily recorded in principal transactions revenue. See Note 6 for information on principal transactions revenue.
Credit derivatives
For a more detailed discussion of credit derivatives, see Note 6 of JPMorgan Chase’s 2014 Annual Report. The Firm does not use notional amounts of credit derivatives as the primary measure of risk management for such derivatives, because the notional amount does not take into account the probability of the occurrence of a credit event, the recovery value of the reference obligation, or related cash instruments and economic hedges, each of which reduces, in the Firm’s view, the risks associated with such derivatives.
Total credit derivatives and credit-related notes
 
Maximum payout/Notional amount
September 30, 2015 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
Credit derivatives
 
 
 
 
 
 
Credit default swaps
$
(1,683,730
)
 
$
1,699,718

$
15,988

 
$
14,572

Other credit derivatives(a)
(44,493
)
 
41,960

(2,533
)
 
18,217

Total credit derivatives
(1,728,223
)
 
1,741,678

13,455

 
32,789

Credit-related notes
(22
)
 
—

(22
)
 
4,357

Total
$
(1,728,245
)
 
$
1,741,678

$
13,433

 
$
37,146

 
 
 
 
 
 
 
 
Maximum payout/Notional amount
December 31, 2014 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
Credit derivatives
 
 
 
 
 
 
Credit default swaps
$
(2,056,982
)
 
$
2,078,096

$
21,114

 
$
18,631

Other credit derivatives(a)
(43,281
)
 
32,048

(11,233
)
 
19,475

Total credit derivatives
(2,100,263
)
 
2,110,144

9,881

 
38,106

Credit-related notes
(40
)
 
—

(40
)
 
3,704

Total
$
(2,100,303
)
 
$
2,110,144

$
9,841

 
$
41,810

(a)
Other credit derivatives predominantly consists of credit 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 on referenced instruments (single-name, portfolio or index) where the Firm has not sold any protection on the identical reference instrument.
The following tables summarize the notional amounts by the ratings and maturity profile, and the total fair value, of credit derivatives and credit-related notes as of September 30, 2015, and December 31, 2014, where JPMorgan Chase is the seller of protection. The maturity profile is based on the remaining contractual maturity of the credit derivative contracts. The ratings profile is based on the rating of the reference entity on which the credit derivative contract is based. The ratings and maturity profile of credit derivatives and credit-related notes where JPMorgan Chase is the purchaser of protection are comparable to the profile reflected below.
Protection sold – credit derivatives and credit-related notes ratings(a)/maturity profile
 
 
 
September 30, 2015
(in millions)
<1 year
 
1–5 years
 
>5 years
 
Total
notional amount
 
Fair value of receivables(b)
 
Fair
value of payables(b)
 
Net fair value
Risk rating of reference entity
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment-grade
$
(278,173
)
 
$
(881,329
)
 
$
(101,523
)
 
$
(1,261,025
)
 
$
15,057

 
$
(6,870
)
 
$
8,187

Noninvestment-grade
(119,287
)
 
(307,953
)
 
(39,980
)
 
(467,220
)
 
13,259

 
(17,838
)
 
(4,579
)
Total
$
(397,460
)
 
$
(1,189,282
)
 
$
(141,503
)
 
$
(1,728,245
)
 
$
28,316

 
$
(24,708
)
 
$
3,608

December 31, 2014
(in millions)
<1 year
 
1–5 years
 
>5 years
 
Total
notional amount
 
Fair value of receivables(b)
 
Fair
value of payables(b)
 
Net fair value
Risk rating of reference entity
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment-grade
$
(323,398
)
 
$
(1,118,293
)
 
$
(79,486
)
 
$
(1,521,177
)
 
$
25,767

 
$
(6,314
)
 
$
19,453

Noninvestment-grade
(157,281
)
 
(396,798
)
 
(25,047
)
 
(579,126
)
 
20,677

 
(22,455
)
 
(1,778
)
Total
$
(480,679
)
 
$
(1,515,091
)
 
$
(104,533
)
 
$
(2,100,303
)
 
$
46,444

 
$
(28,769
)
 
$
17,675


(a)
The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s Investors Service ("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.