Fair Value Measurement

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair value measurement

JPMorgan Chase carries a portion of its assets and liabilities at fair value. These assets and liabilities are predominantly carried at fair value on a recurring basis (i.e., assets and liabilities that are measured and reported at fair value on the Firm’s Consolidated balance sheets). Certain assets (e.g., certain mortgage, home equity and other loans where the carrying value is based on the fair value of the underlying collateral), liabilities and unfunded lending-related commitments are measured at fair value on a nonrecurring basis; that is, they are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment).

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is based on quoted market prices, where available. If listed prices or quotes are not available, fair value is based on models that consider relevant transaction characteristics (such as maturity) and use as inputs observable or unobservable market parameters, including but not limited to yield curves, interest rates, volatilities, equity or debt prices, foreign exchange rates and credit curves. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value, as described below.

The level of precision in estimating unobservable market inputs or other factors can affect the amount of gain or loss recorded for a particular position. Furthermore, while the Firm believes its valuation methods are appropriate and consistent with those of other market participants, the methods and assumptions used reflect management judgment and may vary across the Firm’s businesses and portfolios.

The Firm uses various methodologies and assumptions in the determination of fair value. The use of different methodologies or assumptions by other market participants compared with those used by the Firm could result in a different estimate of fair value at the reporting date.

Valuation process

Risk-taking functions are responsible for providing fair value estimates for assets and liabilities carried on the Consolidated balance sheets at fair value. The Firm’s valuation control function, which is part of the Firm’s Finance function and independent of the risk-taking functions, is responsible for verifying these estimates and determining any fair value adjustments that may be required to ensure that the Firm’s positions are recorded at fair value. In addition, the firmwide Valuation Governance Forum (“VGF”) is composed of senior finance and risk executives and is responsible for overseeing the management of risks arising from valuation activities conducted across the Firm. The VGF is chaired by the Firmwide head of the valuation control function (under the direction of the Firm’s Chief Financial Officer (“CFO”)), and includes sub-forums covering the Corporate & Investment Bank, Consumer & Community Banking (“CCB”), Commercial Banking, Asset Management and certain corporate functions including Treasury and Chief Investment Office (“CIO”).

The valuation control function verifies fair value estimates provided by the risk-taking functions by leveraging independently derived prices, valuation inputs and other market data, where available. Where independent prices or inputs are not available, additional review is performed by the valuation control function to ensure the reasonableness of the estimates. The review may include evaluating the limited market activity including client unwinds, benchmarking of valuation inputs to those for similar instruments, decomposing the valuation of structured instruments into individual components, comparing expected to actual cash flows, reviewing profit and loss trends, and reviewing trends in collateral valuation. There are also additional levels of management review for more significant or complex positions.

The valuation control function determines any valuation adjustments that may be required to the estimates provided by the risk-taking functions. No adjustments are applied to the quoted market price for instruments classified within level 1 of the fair value hierarchy (see below for further information on the fair value hierarchy). For other positions, judgment is required to assess the need for valuation adjustments to appropriately reflect liquidity considerations, unobservable parameters, and, for certain portfolios that meet specified criteria, the size of the net open risk position. The determination of such adjustments follows a consistent framework across the Firm:

• Liquidity valuation adjustments are considered where an observable external price or valuation parameter exists but is of lower reliability, potentially due to lower market activity. Liquidity valuation adjustments are applied and determined based on current market conditions. Factors that may be considered in determining the liquidity adjustment include analysis of: (1) the estimated bid-offer spread for the instrument being traded; (2) alternative pricing points for similar instruments in active markets; and (3) the range of reasonable values that the price or parameter could take.

• The Firm manages certain portfolios of financial instruments on the basis of net open risk exposure and, as permitted by U.S. GAAP, has elected to estimate the fair value of such portfolios on the basis of a transfer of the entire net open risk position in an orderly transaction. Where this is the case, valuation adjustments may be necessary to reflect the cost of exiting a larger-than-normal market-size net open risk position. Where applied, such adjustments are based on factors that a relevant market participant would consider in the transfer of the net open risk position, including the size of the adverse market move that is likely to occur during the period required to reduce the net open risk position to a normal market-size.

• Unobservable parameter valuation adjustments may be made when positions are valued using prices or input parameters to valuation models that are unobservable due to a lack of market activity or because they cannot be implied from observable market data. Such prices or parameters must be estimated and are, therefore, subject to management judgment. Unobservable parameter valuation adjustments are applied to reflect the uncertainty inherent in the resulting valuation estimate.

Where appropriate, the Firm also applies adjustments to its estimates of fair value in order to appropriately reflect counterparty credit quality, the Firm’s own creditworthiness and the impact of funding, utilizing a consistent framework across the Firm. For more information on such adjustments see Credit and funding adjustments on page 200 of this Note.

Valuation model review and approval

If prices or quotes are not available for an instrument or a similar instrument, fair value is generally determined using valuation models that consider relevant transaction data such as maturity and use as inputs market-based or independently sourced parameters. Where this is the case the price verification process described above is applied to the inputs to those models.

The Model Risk function is independent of the model owners. It reviews and approves a wide range of models, including risk management, valuation and regulatory capital models used by the Firm. The Model Risk review and governance functions are part of the Firm’s Model Risk unit, and the Firmwide Model Risk Executive reports to the Firm’s Chief Risk Officer (“CRO”).When reviewing a model, the Model Risk function analyzes and challenges the model methodology, and the reasonableness of model assumptions and may perform or require additional testing, including back-testing of model outcomes.

New valuation models, as well as material changes to existing valuation models, are reviewed and approved prior to implementation except where specified conditions are met, including the approval of an exception granted by the head of the Model Risk function. The Model Risk function performs an annual status assessment that considers developments in the product or market to determine whether valuation models which have already been reviewed need to be, on a full or partial basis, reviewed and approved again.

Valuation hierarchy

A three-level valuation hierarchy has been established under U.S. GAAP for disclosure of fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows.

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – one or more inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following table describes the valuation methodologies generally used by the Firm to measure its significant products/instruments at fair value, including the general classification of such instruments pursuant to the valuation hierarchy.

Product/instrument	Valuation methodology	Classifications in the valuation hierarchy
Securities financing agreements	Valuations are based on discounted cash flows, which consider:	Level 2
	• Derivative features: for further information refer to the discussion of derivatives below.
	• Market rates for the respective maturity
	• Collateral
Loans and lending-related commitments — wholesale
Trading portfolio	Where observable market data is available, valuations are based on:	Level 2 or 3
	• Observed market prices (circumstances are infrequent)
	• Relevant broker quotes
	• Observed market prices for similar instruments
	Where observable market data is unavailable or limited, valuations are based on discounted cash flows, which consider the following:
	• Credit spreads derived from the cost of credit default swaps (“CDS”); or benchmark credit curves developed by the Firm, by industry and credit rating
	• Prepayment speed
Loans held for investment and associated lending-related commitments	Valuations are based on discounted cash flows, which consider:	Predominantly level 3
	• Credit spreads, derived from the cost of CDS; or benchmark credit curves developed by the Firm, by industry and credit rating
	• Prepayment speed
	Lending-related commitments are valued similar to loans and reflect the portion of an unused commitment expected, based on the Firm’s average portfolio historical experience, to become funded prior to an obligor default
	For information regarding the valuation of loans measured at collateral value, see Note 14.
Loans — consumer
Held for investment consumer loans, excluding credit card	Valuations are based on discounted cash flows, which consider:	Predominantly level 3
	• Expected lifetime credit losses -considering expected and current default rates, and loss severity
	•   Prepayment speed
	•   Discount rates
	•   Servicing costs
	For information regarding the valuation of loans measured at collateral value, see Note 14.
Held for investment credit card receivables	Valuations are based on discounted cash flows, which consider:	Level 3
	• Credit costs — allowance for loan losses is considered a reasonable proxy for the credit cost
	• Projected interest income, late-fee revenue and loan repayment rates
	• Discount rates
	• Servicing costs
Trading loans — conforming residential mortgage loans expected to be sold	Fair value is based upon observable prices for mortgage-backed securities with similar collateral and incorporates adjustments to these prices to account for differences between the securities and the value of the underlying loans, which include credit characteristics, portfolio composition, and liquidity.	Predominantly level 2

Product/instrument	Valuation methodology, inputs and assumptions	Classifications in the valuation hierarchy
Investment and trading securities	Quoted market prices are used where available.	Level 1
	In the absence of quoted market prices, securities are valued based on:	Level 2 or 3
	• Observable market prices for similar securities
	•   Relevant broker quotes
	•   Discounted cash flows
	In addition, the following inputs to discounted cash flows are used for the following products:
	Mortgage- and asset-backed securities specific inputs:
	•   Collateral characteristics
	• Deal-specific payment and loss allocations
	• Current market assumptions related to yield, prepayment speed, conditional default rates and loss severity
	Collateralized loan obligations (“CLOs”), specific inputs:
	•   Collateral characteristics
	•   Deal-specific payment and loss allocations
	•   Expected prepayment speed, conditional default rates, loss severity
	•   Credit spreads
	• Credit rating data
Physical commodities	Valued using observable market prices or data	Predominantly Level 1 and 2
Derivatives	Exchange-traded derivatives that are actively traded and valued using the exchange price.	Level 1
	Derivatives that are valued using models such as the Black-Scholes option pricing model, simulation models, or a combination of models, that use observable or unobservable valuation inputs (e.g., plain vanilla options and interest rate and credit default swaps). Inputs include:	Level 2 or 3
	•   Contractual terms including the period to maturity
	•   Readily observable parameters including interest rates and volatility
	•   Credit quality of the counterparty and of the Firm
	•   Market funding levels
	•   Correlation levels
	In addition, the following specific inputs are used for the following derivatives that are valued based on models with significant unobservable inputs:
	Structured credit derivatives specific inputs include:
	•   CDS spreads and recovery rates
	•   Credit correlation between the underlying debt instruments (levels are modeled on a transaction basis and calibrated to liquid benchmark tranche indices)
	•   Actual transactions, where available, are used to regularly recalibrate unobservable parameters
	Certain long-dated equity option specific inputs include:
	•   Long-dated equity volatilities
	Certain interest rate and foreign exchange (“FX”) exotic options specific inputs include:
	•   Interest rate correlation
	•   Interest rate spread volatility
	•   Foreign exchange correlation
	•   Correlation between interest rates and foreign exchange rates
	•   Parameters describing the evolution of underlying interest rates
	Certain commodity derivatives specific inputs include:
	•   Commodity volatility
	• Forward commodity price
	Additionally, adjustments are made to reflect counterparty credit quality (credit valuation adjustments or “CVA”), the Firm’s own creditworthiness (debit valuation adjustments or “DVA”), and funding valuation adjustment (“FVA”) to incorporate the impact of funding. See page 200 of this Note.

Product/instrument	Valuation methodology, inputs and assumptions	Classification in the valuation hierarchy
Mortgage servicing rights (“MSRs”)	See Mortgage servicing rights in Note 17.	Level 3
Private equity direct investments	Private equity direct investments	Level 2 or 3
	Fair value is estimated using all available information and considering the range of potential inputs, including:
	• Transaction prices
	• Trading multiples of comparable public companies
	• Operating performance of the underlying portfolio company
	• Additional available inputs relevant to the investment
	• Adjustments as required, since comparable public companies are not identical to the company being valued, and for company-specific issues and lack of liquidity
	Public investments held in the Private Equity portfolio	Level 1 or 2
	• Valued using observable market prices less adjustments for relevant restrictions, where applicable
Fund investments (i.e., mutual/collective investment funds, private equity funds, hedge funds, and real estate funds)	Net asset value (“NAV”)
	• NAV is validated by sufficient level of observable activity (i.e., purchases and sales)	Level 1
	• Adjustments to the NAV as required, for restrictions on redemption (e.g., lock up periods or withdrawal limitations) or where observable activity is limited	Level 2 or 3(a)
Beneficial interests issued by consolidated VIEs	Valued using observable market information, where available	Level 2 or 3
	In the absence of observable market information, valuations are based on the fair value of the underlying assets held by the VIE
Long-term debt, not carried at fair value	Valuations are based on discounted cash flows, which consider:	Predominantly level 2
	•   Market rates for respective maturity
	• The Firm’s own creditworthiness (DVA). See page 200 of     this Note.
Structured notes (included in deposits, other borrowed funds and long-term debt)	• Valuations are based on discounted cash flow analyses that consider the embedded derivative and the terms and payment structure of the note. • The embedded derivative features are considered using models such as the Black-Scholes option pricing model, simulation models, or a combination of models that use observable or unobservable valuation inputs, depending on the embedded derivative. The specific inputs used vary according to the nature of the embedded derivative features, as described in the discussion above regarding derivative valuation. Adjustments are then made to this base valuation to reflect the Firm’s own creditworthiness (DVA) and to incorporate the impact of funding (FVA). See page 200 of this Note.	Level 2 or 3

(a) Excludes certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient.

The following table presents the asset and liabilities reported at fair value as ofDecember 31, 2015 and 2014, by major product category and fair value hierarchy.

Assets and liabilities measured at fair value on a recurring basis
	Fair value hierarchy
December 31, 2015 (in millions)	Level 1		Level 2			Level 3			Derivative netting adjustments			Total fair value
Federal funds sold and securities purchased under resale agreements	$	—	$	23,141		$	—		$	—		$	23,141
Securities borrowed	—		395			—			—			395
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. government agencies(a)	6		31,815			715			—			32,536
Residential – nonagency	—		1,299			194			—			1,493
Commercial – nonagency	—		1,080			115			—			1,195
Total mortgage-backed securities	6		34,194			1,024			—			35,224
U.S. Treasury and government agencies(a)	12,036		6,985			—			—			19,021
Obligations of U.S. states and municipalities	—		6,986			651			—			7,637
Certificates of deposit, bankers’ acceptances and commercial paper	—		1,042			—			—			1,042
Non-U.S. government debt securities	27,974		25,064			74			—			53,112
Corporate debt securities	—		22,807			736			—			23,543
Loans(b)	—		22,211			6,604			—			28,815
Asset-backed securities	—		2,392			1,832			—			4,224
Total debt instruments	40,016		121,681			10,921			—			172,618
Equity securities	94,059		606			265			—			94,930
Physical commodities(c)	3,593		1,064			—			—			4,657
Other	—		11,152			744			—			11,896
Total debt and equity instruments(d)	137,668		134,503			11,930			—			284,101
Derivative receivables:
Interest rate	354		666,491			2,766			(643,248		)	26,363
Credit	—		48,850			2,618			(50,045		)	1,423
Foreign exchange	734		177,525			1,616			(162,698		)	17,177
Equity	—		35,150			709			(30,330		)	5,529
Commodity	108		24,720			237			(15,880		)	9,185
Total derivative receivables(e)	1,196		952,736			7,946			(902,201		)	59,677
Total trading assets	138,864		1,087,239			19,876			(902,201		)	343,778
Available-for-sale securities:
Mortgage-backed securities:
U.S. government agencies(a)	—		55,066			—			—			55,066
Residential – nonagency	—		27,618			1			—			27,619
Commercial – nonagency	—		22,897			—			—			22,897
Total mortgage-backed securities	—		105,581			1			—			105,582
U.S. Treasury and government agencies(a)	10,998		38			—			—			11,036
Obligations of U.S. states and municipalities	—		33,550			—			—			33,550
Certificates of deposit	—		283			—			—			283
Non-U.S. government debt securities	23,199		13,477			—			—			36,676
Corporate debt securities	—		12,436			—			—			12,436
Asset-backed securities:
Collateralized loan obligations	—		30,248			759			—			31,007
Other	—		9,033			64			—			9,097
Equity securities	2,087		—			—			—			2,087
Total available-for-sale securities	36,284		204,646			824			—			241,754
Loans	—		1,343			1,518			—			2,861
Mortgage servicing rights	—		—			6,608			—			6,608
Other assets:
Private equity investments(f)	102		101			1,657			—			1,860
All other	3,815		28			744			—			4,587
Total other assets	3,917		129			2,401			—			6,447
Total assets measured at fair value on a recurring basis	$	179,065	$	1,316,893	(g)	$	31,227	(g)	$	(902,201	)	$	624,984
Deposits	$	—	$	9,566		$	2,950		$	—		$	12,516
Federal funds purchased and securities loaned or sold under repurchase agreements	—		3,526			—			—			3,526
Other borrowed funds	—		9,272			639			—			9,911
Trading liabilities:
Debt and equity instruments(d)	53,845		20,199			63			—			74,107
Derivative payables:
Interest rate	216		633,060			1,890			(624,945		)	10,221
Credit	—		48,460			2,069			(48,988		)	1,541
Foreign exchange	669		187,890			2,341			(171,131		)	19,769
Equity	—		36,440			2,223			(29,480		)	9,183
Commodity	52		26,430			1,172			(15,578		)	12,076
Total derivative payables(e)	937		932,280			9,695			(890,122		)	52,790
Total trading liabilities	54,782		952,479			9,758			(890,122		)	126,897
Accounts payable and other liabilities	4,382		—			19			—			4,401
Beneficial interests issued by consolidated VIEs	—		238			549			—			787
Long-term debt	—		21,452			11,613			—			33,065
Total liabilities measured at fair value on a recurring basis	$	59,164	$	996,533		$	25,528		$	(890,122	)	$	191,103

	Fair value hierarchy
December 31, 2014 (in millions)	Level 1		Level 2			Level 3		Derivative netting adjustments				Total fair value
Federal funds sold and securities purchased under resale agreements	$	—	$	28,585		$	—	$	—			$	28,585
Securities borrowed	—		992			—		—				992
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. government agencies(a)	14		31,904			922		—				32,840
Residential – nonagency	—		1,381			663		—				2,044
Commercial – nonagency	—		927			306		—				1,233
Total mortgage-backed securities	14		34,212			1,891		—				36,117
U.S. Treasury and government agencies(a)	17,816		8,460			—		—				26,276
Obligations of U.S. states and municipalities	—		9,298			1,273		—				10,571
Certificates of deposit, bankers’ acceptances and commercial paper	—		1,429			—		—				1,429
Non-U.S. government debt securities	25,854		27,294			302		—				53,450
Corporate debt securities	—		28,099			2,989		—				31,088
Loans(b)	—		23,080			13,287		—				36,367
Asset-backed securities	—		3,088			1,264		—				4,352
Total debt instruments	43,684		134,960			21,006		—				199,650
Equity securities	104,890		624			431		—				105,945
Physical commodities(c)	2,739		1,741			2		—				4,482
Other	—		8,762			1,050		—				9,812
Total debt and equity instruments(d)	151,313		146,087			22,489		—				319,889
Derivative receivables:
Interest rate	473		945,635		(g)	4,149		(916,532		)	(g)	33,725
Credit	—		73,853			2,989		(75,004		)		1,838
Foreign exchange	758		212,153		(g)	2,276		(193,934		)	(g)	21,253
Equity	—		39,937		(g)	2,552		(34,312		)	(g)	8,177
Commodity	247		42,807			599		(29,671		)		13,982
Total derivative receivables(e)	1,478		1,314,385		(g)	12,565		(1,249,453		)	(g)	78,975
Total trading assets	152,791		1,460,472		(g)	35,054		(1,249,453		)	(g)	398,864
Available-for-sale securities:
Mortgage-backed securities:
U.S. government agencies(a)	—		65,319			—		—				65,319
Residential – nonagency	—		50,865			30		—				50,895
Commercial – nonagency	—		21,009			99		—				21,108
Total mortgage-backed securities	—		137,193			129		—				137,322
U.S. Treasury and government agencies(a)	13,591		54			—		—				13,645
Obligations of U.S. states and municipalities	—		30,068			—		—				30,068
Certificates of deposit	—		1,103			—		—				1,103
Non-U.S. government debt securities	24,074		28,669			—		—				52,743
Corporate debt securities	—		18,532			—		—				18,532
Asset-backed securities:
Collateralized loan obligations	—		29,402			792		—				30,194
Other	—		12,499			116		—				12,615
Equity securities	2,530		—			—		—				2,530
Total available-for-sale securities	40,195		257,520			1,037		—				298,752
Loans	—		70			2,541		—				2,611
Mortgage servicing rights	—		—			7,436		—				7,436
Other assets:
Private equity investments(f)	648		2,624			2,225		—				5,497
All other	4,018		17			959		—				4,994
Total other assets	4,666		2,641			3,184		—				10,491
Total assets measured at fair value on a recurring basis	$	197,652	$	1,750,280	(g)	$	49,252	$	(1,249,453	)	(g)	$	747,731
Deposits	$	—	$	5,948		$	2,859	$	—			$	8,807
Federal funds purchased and securities loaned or sold under repurchase agreements	—		2,979			—		—				2,979
Other borrowed funds	—		13,286			1,453		—				14,739
Trading liabilities:
Debt and equity instruments(d)	62,914		18,713			72		—				81,699
Derivative payables:
Interest rate	499		914,357		(g)	3,523		(900,634		)	(g)	17,745
Credit	—		73,095			2,800		(74,302		)		1,593
Foreign exchange	746		221,066		(g)	2,802		(201,644		)	(g)	22,970
Equity	—		41,925		(g)	4,337		(34,522		)	(g)	11,740
Commodity	141		44,318			1,164		(28,555		)		17,068
Total derivative payables(e)	1,386		1,294,761		(g)	14,626		(1,239,657		)	(g)	71,116
Total trading liabilities	64,300		1,313,474		(g)	14,698		(1,239,657		)	(g)	152,815
Accounts payable and other liabilities (g)	4,129		—			26		—				4,155
Beneficial interests issued by consolidated VIEs	—		1,016			1,146		—				2,162
Long-term debt	—		18,349			11,877		—				30,226
Total liabilities measured at fair value on a recurring basis	$	68,429	$	1,355,052	(g)	$	32,059	$	(1,239,657	)	(g)	$	215,883

Note: Effective April 1, 2015, the Firm adopted new accounting guidance for investments in certain entities that calculate net asset value per share (or its equivalent). As a result of the adoption of this new guidance, certain investments that are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient are not required to be classified in the fair value hierarchy. At December 31, 2015 and 2014, the fair values of these investments, which include certain hedge funds, private equity funds, real estate and other funds, were $1.2 billion and $1.5 billion, respectively, of which $337 million and $1.2 billion had been previously classified in level 2 and level 3, respectively, at December 31, 2014. Included on the Firm’s balance sheet at December 31, 2015 and 2014, were trading assets of $61 million and $124 million, respectively, and other assets of $1.2 billion and $1.4 billion, respectively. The guidance was required to be applied retrospectively, and accordingly, prior period amounts have been revised to conform with the current period presentation.

(a) At December 31, 2015 and 2014, included total U.S. government-sponsored enterprise obligations of $67.0 billion and $84.1 billion, respectively, which were predominantly mortgage-related.

(b) At December 31, 2015 and 2014, included within trading loans were $11.8 billion and $17.0 billion, respectively, of residential first-lien mortgages, and $4.3 billion and $5.8 billion, respectively, of commercial first-lien mortgages. Residential mortgage loans include conforming mortgage loans originated with the intent to sell to U.S. government agencies of $5.3 billion and $7.7 billion, respectively, and reverse mortgages of $2.5 billion and $3.4 billion, respectively.

(c) Physical commodities inventories are generally accounted for at the lower of cost or market. “Market” is a term defined in U.S. GAAP as not exceeding fair value less costs to sell (“transaction costs”). Transaction costs for the Firm’s physical commodities inventories are either not applicable or immaterial to the value of the inventory. Therefore, market approximates fair value for the Firm’s physical commodities inventories. When fair value hedging has been applied (or when market is below cost), the carrying value of physical commodities approximates fair value, because under fair value hedge accounting, the cost basis is adjusted for changes in fair value. For a further discussion of the Firm’s hedge accounting relationships, see Note 6. To provide consistent fair value disclosure information, all physical commodities inventories have been included in each period presented.

(d) Balances reflect the reduction of securities owned (long positions) by the amount of identical securities sold but not yet purchased (short positions).

(e) As permitted under U.S. GAAP, the Firm has elected to net derivative receivables and derivative payables and the related cash collateral received and paid when a legally enforceable master netting agreement exists. For purposes of the tables above, the Firm does not reduce derivative receivables and derivative payables balances for this netting adjustment, either within or across the levels of the fair value hierarchy, as such netting is not relevant to a presentation based on the transparency of inputs to the valuation of an asset or liability. However, if the Firm were to net such balances within level 3, the reduction in the level 3 derivative receivables and payables balances would be $546 million and $2.5 billion at December 31, 2015 and 2014, respectively; this is exclusive of the netting benefit associated with cash collateral, which would further reduce the level 3 balances.

(f) Private equity instruments represent investments within the Corporate line of business. The cost basis of the private equity investment portfolio totaled $3.5 billion and $6.0 billion at December 31, 2015 and 2014, respectively.

(g) Certain prior period amounts (including the corresponding fair value parenthetical disclosure for accounts payable and other liabilities on the Consolidated balance sheets) were revised to conform with the current period presentation.

Transfers between levels for instruments carried at fair value on a recurring basis

For the years ended December 31, 2015 and 2014, there were no significant transfers between levels 1 and 2.

During the year ended December 31, 2015, transfers from level 3 to level 2 and from level 2 to level 3 included the following:

• $3.1 billion of long-term debt and $1.0 billion of deposits driven by an increase in observability on certain structured notes with embedded interest rate and FX derivatives and a reduction of the significance in the unobservable inputs for certain structured notes with embedded equity derivatives

• $2.1 billion of gross equity derivatives for both receivables and payables as a result of an increase in observability and a decrease in the significance in unobservable inputs; partially offset by transfers into level 3 resulting in net transfers of approximately $1.2 billion for both receivables and payables

• $2.8 billion of trading loans driven by an increase in observability of certain collateralized financing transactions; and $2.4 billion of corporate debt driven by a decrease in the significance in the unobservable inputs and an increase in observability for certain structured products

During the year ended December 31, 2014, transfers from level 3 to level 2 included the following:

• $4.3 billion and $4.4 billion of gross equity derivative receivables and payables, respectively, due to increased observability of certain equity option valuation inputs

• $2.7 billion of trading loans, $2.6 billion of margin loans, $2.3 billion of private equity investments, $2.0 billion of corporate debt, and $1.3 billion of long-term debt, based on increased liquidity and price transparency

Transfers from level 2 into level 3 included $1.1 billion of other borrowed funds, $1.1 billion of trading loans and $1.0 billion of long-term debt, based on a decrease in observability of valuation inputs and price transparency.

During the year ended December 31, 2013, transfers from level 3 to level 2 included the following:

• Certain highly rated CLOs, including $27.4 billion held in the Firm’s available-for-sale (“AFS”) securities portfolio and $1.4 billion held in the trading portfolio, based on increased liquidity and price transparency;

• $1.3 billion of long-term debt, largely driven by an increase in observability of certain equity structured notes.

Transfers from level 2 to level 3 included $1.4 billion of corporate debt securities in the trading portfolio largely driven by a decrease in observability for certain credit instruments.

All transfers are assumed to occur at the beginning of the quarterly reporting period in which they occur.

Level 3 valuations

The Firm has established well-documented processes for determining fair value, including for instruments where fair value is estimated using significant unobservable inputs (level 3). For further information on the Firm’s valuation process and a detailed discussion of the determination of fair value for individual financial instruments, seepages 185–188of this Note.

Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of observable market information available to the Firm. For instruments valued using internally developed models that use significant unobservable inputs and are therefore classified within level 3 of the fair value hierarchy, judgments used to estimate fair value are more significant than those required when estimating the fair value of instruments classified within levels 1 and 2.

In arriving at an estimate of fair value for an instrument within level 3, management must first determine the appropriate model to use. Second, due to the lack of observability of significant inputs, management must assess all relevant empirical data in deriving valuation inputs including, but not limited to, transaction details, yield curves, interest rates, prepayment speed, default rates, volatilities, correlations, equity or debt prices, valuations of comparable instruments, foreign exchange rates and credit curves.

The following table presents the Firm’s primary level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, the significant unobservable inputs, the range of values for those inputs and, for certain instruments, the weighted averages of such inputs. While the determination to classify an instrument within level 3 is based on the significance of the unobservable inputs to the overall fair value measurement, level 3 financial instruments typically include observable components (that is, components that are actively quoted and can be validated to external sources) in addition to the unobservable components. The level 1 and/or level 2 inputs are not included in the table. In addition, the Firm manages the risk of the observable components of level 3 financial instruments using securities and derivative positions that are classified within levels 1 or 2 of the fair value hierarchy.

The range of values presented in the table is representative of the highest and lowest level input used to value the significant groups of instruments within a product/instrument classification. Where provided, the weighted averages of the input values presented in the table are calculated based on the fair value of the instruments that the input is being used to value.

In the Firm’s view, the input range and the weighted average value do not reflect the degree of input uncertainty or an assessment of the reasonableness of the Firm’s estimates and assumptions. Rather, they reflect the characteristics of the various instruments held by the Firm and the relative distribution of instruments within the range of characteristics. For example, two option contracts may have similar levels of market risk exposure and valuation uncertainty, but may have significantly different implied volatility levels because the option contracts have different underlyings, tenors, or strike prices. The input range and weighted average values will therefore vary from period-to-period and parameter-to-parameter based on the characteristics of the instruments held by the Firm at each balance sheet date.

For the Firm’s derivatives and structured notes positions classified within level 3 at December 31, 2015, interest rate correlation inputs used in estimating fair value were concentrated towards the upper end of the range presented; equities correlation inputs were concentrated at the lower end of the range;the credit correlation inputs were distributed across the range presented; and the foreign exchange correlation inputs were concentrated at the top end of the range presented. In addition, the interest rate volatility inputs and the foreign exchange correlation inputs used in estimating fair value were each concentrated at the upper end of the range presented. The equity volatilities are concentrated in the lower half end of the range. The forward commodity prices used in estimating the fair value of commodity derivatives were concentrated within the lower end of the range presented.

Level 3 inputs(a)
December 31, 2015 (in millions, except for ratios and basis points)
Product/Instrument	Fair value			Principal valuation technique	Unobservable inputs	Range of input values					Weighted average
Residential mortgage-backed securities and loans	$	5,212		Discounted cash flows	Yield	3%			-	26%	6%
					Prepayment speed	0%			-	20%	6%
					Conditional default rate	0%			-	33%	2%
					Loss severity	0%			-	100%	28%
Commercial mortgage-backed securities and loans(b)	2,844			Discounted cash flows	Yield	1%			-	25%	6%
					Conditional default rate	0%			-	91%	29%
					Loss severity	40%					40%
Corporate debt securities, obligations of U.S. states and municipalities, and other(c)	3,277			Discounted cash flows	Credit spread	60 bps			-	225 bps	146 bps
					Yield	1%			-	20%	5%
	2,740			Market comparables	Price	$	—		-	$168	$89
Net interest rate derivatives	876			Option pricing	Interest rate correlation	(52		)%	-	99%
					Interest rate spread volatility	3%			-	38%
Net credit derivatives(b)(c)	549			Discounted cash flows	Credit correlation	35%			-	90%
Net foreign exchange derivatives	(725		)	Option pricing	Foreign exchange correlation	0%			-	60%
Net equity derivatives	(1,514		)	Option pricing	Equity volatility	20%			-	65%
Net commodity derivatives	(935		)	Discounted cash flows	Forward commodity price	$	22		-	$46 per barrel
Collateralized loan obligations	759			Discounted cash flows	Credit spread	354 bps			-	550 bps	396 bps
					Prepayment speed	20%					20%
					Conditional default rate	2%					2%
					Loss severity	40%					40%
	180			Market comparables	Price	$	—		-	$99	$69
Mortgage servicing rights	6,608			Discounted cash flows	Refer to Note 17
Private equity investments	1,657			Market comparables	EBITDA multiple	7.2x			-	10.4x	8.5x
					Liquidity adjustment	0%			-	13%	8%
Long-term debt, other borrowed funds, and deposits(d)	14,707			Option pricing	Interest rate correlation	(52		)%	-	99%
					Interest rate spread volatility	3%			-	38%
					Foreign exchange correlation	0%			-	60%
					Equity correlation	(50		)%	-	80%
	495			Discounted cash flows	Credit correlation	35%			-	90%
Beneficial interests issued by consolidated VIEs(e)	549			Discounted cash flows	Yield	4%			-	28%	4%
					Prepayment Speed	1%			-	12%	6%
					Conditional default rate	2%			-	15%	2%
					Loss severity	30%			-	100%	31%

(a) The categories presented in the table have been aggregated based upon the product type, which may differ from their classification on the Consolidated balance sheets.

(b) The unobservable inputs and associated input ranges for approximately $349 million of credit derivative receivables and $310 million of credit derivative payables with underlying commercial mortgage risk have been included in the inputs and ranges provided for commercial mortgage-backed securities and loans.

(c) The unobservable inputs and associated input ranges for approximately $434 million of credit derivative receivables and $401 million of credit derivative payables with underlying asset-backed securities risk have been included in the inputs and ranges provided for corporate debt securities, obligations of U.S. states and municipalities and other.

(d) Long-term debt, other borrowed funds and deposits include structured notes issued by the Firm that are predominantly financial instruments containing embedded derivatives. The estimation of the fair value of structured notes is predominantly based on the derivative features embedded within the instruments. The significant unobservable inputs are broadly consistent with those presented for derivative receivables.

(e) The parameters are related to residential mortgage-backed securities.

Changes in and ranges of unobservable inputs

The following discussion provides a description of the impact on a fair value measurement of a change in each unobservable input in isolation, and the interrelationship between unobservable inputs, where relevant and significant. The impact of changes in inputs may not be independent as a change in one unobservable input may give rise to a change in another unobservable input; where relationships exist between two unobservable inputs, those relationships are discussed below. Relationships may also exist between observable and unobservable inputs (for example, as observable interest rates rise, unobservable prepayment rates decline); such relationships have not been included in the discussion below. In addition, for each of the individual relationships described below, the inverse relationship would also generally apply.

In addition, the following discussion provides a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the Firm’s positions.

Yield – The yield of an asset is the interest rate used to discount future cash flows in a discounted cash flow calculation. An increase in the yield, in isolation, would result in a decrease in a fair value measurement.

Credit spread – The credit spread is the amount of additional annualized return over the market interest rate that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the discount rate used in a discounted cash flow calculation. Generally, an increase in the credit spread would result in a decrease in a fair value measurement.

The yield and the credit spread of a particular mortgage-backed security primarily reflect the risk inherent in the instrument. The yield is also impacted by the absolute level of the coupon paid by the instrument (which may not correspond directly to the level of inherent risk). Therefore, the range of yield and credit spreads reflects the range of risk inherent in various instruments owned by the Firm. The risk inherent in mortgage-backed securities is driven by the subordination of the security being valued and the characteristics of the underlying mortgages within the collateralized pool, including borrower FICO scores, loan-to-value ratios for residential mortgages and the nature of the property and/or any tenants for commercial mortgages. For corporate debt securities, obligations of U.S. states and municipalities and other similar instruments, credit spreads reflect the credit quality of the obligor and the tenor of the obligation.

Prepayment speed – The prepayment speed is a measure of the voluntary unscheduled principal repayments of a prepayable obligation in a collateralized pool. Prepayment speeds generally decline as borrower delinquencies rise. An increase in prepayment speeds, in isolation, would result in a decrease in a fair value measurement of assets valued at a premium to par and an increase in a fair value measurement of assets valued at a discount to par.

Prepayment speeds may vary from collateral pool to collateral pool, and are driven by the type and location of the underlying borrower, the remaining tenor of the obligation as well as the level and type (e.g., fixed or floating) of interest rate being paid by the borrower. Typically collateral pools with higher borrower credit quality have a higher prepayment rate than those with lower borrower credit quality, all other factors being equal.

Conditional default rate – The conditional default rate is a measure of the reduction in the outstanding collateral balance underlying a collateralized obligation as a result of defaults. While there is typically no direct relationship between conditional default rates and prepayment speeds, collateralized obligations for which the underlying collateral has high prepayment speeds will tend to have lower conditional default rates. An increase in conditional default rates would generally be accompanied by an increase in loss severity and an increase in credit spreads. An increase in the conditional default rate, in isolation, would result in a decrease in a fair value measurement. Conditional default rates reflect the quality of the collateral underlying a securitization and the structure of the securitization itself. Based on the types of securities owned in the Firm’s market-making portfolios, conditional default rates are most typically at the lower end of the range presented.

Loss severity – The loss severity (the inverse concept is the recovery rate) is the expected amount of future realized losses resulting from the ultimate liquidation of a particular loan, expressed as the net amount of loss relative to the outstanding loan balance. An increase in loss severity is generally accompanied by an increase in conditional default rates. An increase in the loss severity, in isolation, would result in a decrease in a fair value measurement.

The loss severity applied in valuing a mortgage-backed security investment depends on factors relating to the underlying mortgages, including the loan-to-value ratio, the nature of the lender’s lien on the property and other instrument-specific factors.

Correlation – Correlation is a measure of the relationship between the movements of two variables (e.g., how the change in one variable influences the change in the other). Correlation is a pricing input for a derivative product where the payoff is driven by one or more underlying risks. Correlation inputs are related to the type of derivative (e.g., interest rate, credit, equity and foreign exchange) due to the nature of the underlying risks. When parameters are positively correlated, an increase in one parameter will result in an increase in the other parameter. When parameters are negatively correlated, an increase in one parameter will result in a decrease in the other parameter. An increase in correlation can result in an increase or a decrease in a fair value measurement. Given a short correlation position, an increase in correlation, in isolation, would generally result in a decrease in a fair value measurement. The range of correlation inputs between risks within the same asset class are generally narrower than those between underlying risks across asset classes. In addition, the ranges of credit correlation inputs tend to be narrower than those affecting other asset classes.

The level of correlation used in the valuation of derivatives with multiple underlying risks depends on a number of factors including the nature of those risks. For example, the correlation between two credit risk exposures would be different than that between two interest rate risk exposures. Similarly, the tenor of the transaction may also impact the correlation input as the relationship between the underlying risks may be different over different time periods. Furthermore, correlation levels are very much dependent on market conditions and could have a relatively wide range of levels within or across asset classes over time, particularly in volatile market conditions.

Volatility – Volatility is a measure of the variability in possible returns for an instrument, parameter or market index given how much the particular instrument, parameter or index changes in value over time. Volatility is a pricing input for options, including equity options, commodity options, and interest rate options. Generally, the higher the volatility of the underlying, the riskier the instrument. Given a long position in an option, an increase in volatility, in isolation, would generally result in an increase in a fair value measurement.

The level of volatility used in the valuation of a particular option-based derivative depends on a number of factors, including the nature of the risk underlying the option (e.g., the volatility of a particular equity security may be significantly different from that of a particular commodity index), the tenor of the derivative as well as the strike price of the option.

EBITDA multiple – EBITDA multiples refer to the input (often derived from the value of a comparable company) that is multiplied by the historic and/or expected earnings before interest, taxes, depreciation and amortization (“EBITDA”) of a company in order to estimate the company’s value. An increase in the EBITDA multiple, in isolation, net of adjustments, would result in an increase in a fair value measurement.

Changes in level 3 recurring fair value measurements

The following tables include a rollforward of the Consolidated balance sheets amounts (including changes in fair value) for financial instruments classified by the Firm within level 3 of the fair value hierarchy for the years endedDecember 31, 2015, 2014 and 2013. When a determination is made to classify a financial instrument within level 3, the determination is based on the significance of the unobservable parameters to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology. Also, the Firm risk-manages the observable components of level 3 financial instruments using securities and derivative positions that are classified within level 1 or 2 of the fair value hierarchy; as these level 1 and level 2 risk management instruments are not included below, the gains or losses in the following tables do not reflect the effect of the Firm’s risk management activities related to such level 3 instruments.

	Fair value measurements using significant unobservable inputs
Year ended December 31, 2015 (in millions)	Fair value at January 1, 2015			Total realized/unrealized gains/(losses)															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2015			Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2015
								Purchases(g)			Sales					Settlements(h)
Assets:
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. government agencies	$	922		$	(28	)		$	327		$	(303	)			$	(132	)	$	(71	)	$	715		$	(27	)
Residential – nonagency	663			130				253			(611		)			(23		)	(218		)	194			4
Commercial – nonagency	306			(14		)		246			(262		)			(22		)	(139		)	115			(5		)
Total mortgage-backed securities	1,891			88				826			(1,176		)			(177		)	(428		)	1,024			(28		)
Obligations of U.S. states and municipalities	1,273			14				352			(133		)			(27		)	(828		)	651			(1		)
Non-U.S. government debt securities	302			9				205			(123		)			(64		)	(255		)	74			(16		)
Corporate debt securities	2,989			(77		)		1,171			(1,038		)			(125		)	(2,184		)	736			2
Loans	13,287			(174		)		3,532			(4,661		)			(3,112		)	(2,268		)	6,604			(181		)
Asset-backed securities	1,264			(41		)		1,920			(1,229		)			(35		)	(47		)	1,832			(32		)
Total debt instruments	21,006			(181		)		8,006			(8,360		)			(3,540		)	(6,010		)	10,921			(256		)
Equity securities	431			96				89			(193		)			(26		)	(132		)	265			82
Physical commodities	2			(2		)		—			—					—			—			—			—
Other	1,050			119				1,581			(1,313		)			192			(885		)	744			85
Total trading assets – debt and equity instruments	22,489			32			(c)	9,676			(9,866		)			(3,374		)	(7,027		)	11,930			(89		)	(c)
Net derivative receivables:(a)
Interest rate	626			962				513			(173		)			(732		)	(320		)	876			263
Credit	189			118				129			(136		)			165			84			549			260
Foreign exchange	(526		)	657				19			(149		)			(296		)	(430		)	(725		)	49
Equity	(1,785		)	731				890			(1,262		)			(158		)	70			(1,514		)	5
Commodity	(565		)	(856		)		1			(24		)			512			(3		)	(935		)	(41		)
Total net derivative receivables	(2,061		)	1,612			(c)	1,552			(1,744		)			(509		)	(599		)	(1,749		)	536			(c)
Available-for-sale securities:
Asset-backed securities	908			(32		)		51			(43		)			(61		)	—			823			(28		)
Other	129			—				—			—					(29		)	(99		)	1			—
Total available-for-sale securities	1,037			(32		)	(d)	51			(43		)			(90		)	(99		)	824			(28		)	(d)
Loans	2,541			(133		)	(c)	1,290			(92		)			(1,241		)	(847		)	1,518			(32		)	(c)
Mortgage servicing rights	7,436			(405		)	(e)	985			(486		)			(922		)	—			6,608			(405		)	(e)
Other assets:
Private equity investments	2,225			(120		)	(c)	281			(362		)			(187		)	(180		)	1,657			(304		)	(c)
All other	959			91			(f)	65			(147		)			(224		)	—			744			15			(f)
	Fair value measurements using significant unobservable inputs
Year ended December 31, 2015 (in millions)	Fair value at January 1, 2015			Total realized/unrealized (gains)/losses															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2015			Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2015
								Purchases(g)			Sales			Issuances		Settlements(h)
Liabilities:(b)
Deposits	$	2,859		$	(39	)	(c)	$	—		$	—		$	1,993	$	(850	)	$	(1,013	)	$	2,950		$	(29	)	(c)
Other borrowed funds	1,453			(697		)	(c)	—			—			3,334		(2,963		)	(488		)	639			(57		)	(c)
Trading liabilities – debt and equity instruments	72			15			(c)	(163		)	160			—		(17		)	(4		)	63			(4		)	(c)
Accounts payable and other liabilities	26			—				—			—			—		(7		)	—			19			—
Beneficial interests issued by consolidated VIEs	1,146			(82		)	(c)	—			—			286		(574		)	(227		)	549			(63		)	(c)
Long-term debt	11,877			(480		)	(c)	(58		)	—			9,359		(6,299		)	(2,786		)	11,613			385			(c)

	Fair value measurements using significant unobservable inputs
Year ended December 31, 2014 (in millions)	Fair value at January 1, 2014			Total realized/unrealized gains/(losses)															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2014			Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2014
								Purchases(g)			Sales					Settlements(h)
Assets:
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. government agencies	$	1,005		$	(97	)		$	351		$	(186	)			$	(121	)	$	(30	)	$	922		$	(92	)
Residential – nonagency	726			66				827			(761		)			(41		)	(154		)	663			(15		)
Commercial – nonagency	432			17				980			(914		)			(60		)	(149		)	306			(12		)
Total mortgage-backed securities	2,163			(14		)		2,158			(1,861		)			(222		)	(333		)	1,891			(119		)
Obligations of U.S. states and municipalities	1,382			90				298			(358		)			(139		)	—			1,273			(27		)
Non-U.S. government debt securities	143			24				719			(617		)			(3		)	36			302			10
Corporate debt securities	5,920			210				5,854			(3,372		)			(4,531		)	(1,092		)	2,989			379
Loans	13,455			387				13,551			(7,917		)			(4,623		)	(1,566		)	13,287			123
Asset-backed securities	1,272			19				2,240			(2,126		)			(283		)	142			1,264			(30		)
Total debt instruments	24,335			716				24,820			(16,251		)			(9,801		)	(2,813		)	21,006			336
Equity securities	867			113				248			(259		)			(286		)	(252		)	431			46
Physical commodities	4			(1		)		—			—					(1		)	—			2			—
Other	2,000			239				1,426			(276		)			(201		)	(2,138		)	1,050			329
Total trading assets – debt and equity instruments	27,206			1,067			(c)	26,494			(16,786		)			(10,289		)	(5,203		)	22,489			711			(c)
Net derivative receivables:(a)
Interest rate	2,379			184				198			(256		)			(1,771		)	(108		)	626			(853		)
Credit	95			(149		)		272			(47		)			92			(74		)	189			(107		)
Foreign exchange	(1,200		)	(137		)		139			(27		)			668			31			(526		)	(62		)
Equity	(1,063		)	154				2,044			(2,863		)			10			(67		)	(1,785		)	583
Commodity	115			(465		)		1			(113		)			(109		)	6			(565		)	(186		)
Total net derivative receivables	326			(413		)	(c)	2,654			(3,306		)			(1,110		)	(212		)	(2,061		)	(625		)	(c)
Available-for-sale securities:
Asset-backed securities	1,088			(41		)		275			(2		)			(101		)	(311		)	908			(40		)
Other	1,234			(19		)		122			—					(223		)	(985		)	129			(2		)
Total available-for-sale securities	2,322			(60		)	(d)	397			(2		)			(324		)	(1,296		)	1,037			(42		)	(d)
Loans	1,931			(254		)	(c)	3,258			(845		)			(1,549		)	—			2,541			(234		)	(c)
Mortgage servicing rights	9,614			(1,826		)	(e)	768			(209		)			(911		)	—			7,436			(1,826		)	(e)
Other assets:
Private equity investments	5,816			400			(c)	145			(1,967		)			(197		)	(1,972		)	2,225			33			(c)
All other	1,382			83			(f)	10			(357		)			(159		)	—			959			59			(f)
	Fair value measurements using significant unobservable inputs
Year ended December 31, 2014 (in millions)	Fair value at January 1, 2014			Total realized/unrealized (gains)/losses															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2014			Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2014
								Purchases(g)			Sales			Issuances		Settlements(h)
Liabilities:(b)
Deposits	$	2,255		$	149		(c)	$	—		$	—		$	1,578	$	(197	)	$	(926	)	$	2,859		$	130		(c)
Other borrowed funds	2,074			(596		)	(c)	—			—			5,377		(6,127		)	725			1,453			(415		)	(c)
Trading liabilities – debt and equity instruments	113			(5		)	(c)	(305		)	323			—		(5		)	(49		)	72			2			(c)
Accounts payable and other liabilities	—			27			(c)	—			—			—		(1		)	—			26			—
Beneficial interests issued by consolidated VIEs	1,240			(4		)	(c)	—			—			775		(763		)	(102		)	1,146			(22		)	(c)
Long-term debt	10,008			(40		)	(c)	—			—			7,421		(5,231		)	(281		)	11,877			(9		)	(c)

	Fair value measurements using significant unobservable inputs
Year ended December 31, 2013 (in millions)	Fair value at January 1, 2013			Total realized/unrealized gains/(losses)															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2013			Change in unrealized gains/(losses) related to financial instruments held at Dec. 31, 2013
								Purchases(g)			Sales					Settlements(h)
Assets:
Trading assets:
Debt instruments:
Mortgage-backed securities:
U.S. government agencies	$	498		$	169			$	819		$	(381	)			$	(100	)	$	—		$	1,005		$	200
Residential – nonagency	663			407				780			(1,028		)			(91		)	(5		)	726			205
Commercial – nonagency	1,207			114				841			(1,522		)			(208		)	—			432			(4		)
Total mortgage-backed securities	2,368			690				2,440			(2,931		)			(399		)	(5		)	2,163			401
Obligations of U.S. states and municipalities	1,436			71				472			(251		)			(346		)	—			1,382			18
Non-U.S. government debt securities	67			4				1,449			(1,479		)			(8		)	110			143			(1		)
Corporate debt securities	5,308			103				7,602			(5,975		)			(1,882		)	764			5,920			466
Loans	10,787			665				10,411			(7,431		)			(685		)	(292		)	13,455			315
Asset-backed securities	3,696			191				1,912			(2,379		)			(292		)	(1,856		)	1,272			105
Total debt instruments	23,662			1,724				24,286			(20,446		)			(3,612		)	(1,279		)	24,335			1,304
Equity securities	1,092			(37		)		328			(266		)			(135		)	(115		)	867			46
Physical commodities	—			(4		)		—			(8		)			—			16			4			(4		)
Other	863			558				659			(95		)			(120		)	135			2,000			1,074
Total trading assets – debt and equity instruments	25,617			2,241			(c)	25,273			(20,815		)			(3,867		)	(1,243		)	27,206			2,420			(c)
Net derivative receivables:(a)
Interest rate	3,322			1,358				344			(220		)			(2,391		)	(34		)	2,379			107
Credit	1,873			(1,697		)		115			(12		)			(357		)	173			95			(1,449		)
Foreign exchange	(1,750		)	(101		)		3			(4		)			683			(31		)	(1,200		)	(110		)
Equity	(1,806		)	2,528				1,305			(2,111		)			(1,353		)	374			(1,063		)	872
Commodity	254			816				105			(3		)			(1,107		)	50			115			410
Total net derivative receivables	1,893			2,904			(c)	1,872			(2,350		)			(4,525		)	532			326			(170		)	(c)
Available-for-sale securities:
Asset-backed securities	28,024			4				579			(57		)			(57		)	(27,405		)	1,088			4
Other	892			26				508			(216		)			(6		)	30			1,234			25
Total available-for-sale securities	28,916			30			(d)	1,087			(273		)			(63		)	(27,375		)	2,322			29			(d)
Loans	2,282			81			(c)	1,065			(191		)			(1,306		)	—			1,931			(21		)	(c)
Mortgage servicing rights	7,614			1,612			(e)	2,215			(725		)			(1,102		)	—			9,614			1,612			(e)
Other assets:
Private equity investments	5,590			824			(c)	537			(1,080		)			140			(195		)	5,816			42			(c)
All other	2,122			(17		)	(f)	49			(427		)			(345		)	—			1,382			(64		)	(f)
	Fair value measurements using significant unobservable inputs
Year ended December 31, 2013 (in millions)	Fair value at January 1, 2013			Total realized/unrealized (gains)/losses															Transfers into and/or out of level 3(i)			Fair value at Dec. 31, 2013			Change in unrealized (gains)/losses related to financial instruments held at Dec. 31, 2013
								Purchases(g)			Sales			Issuances		Settlements(h)
Liabilities:(b)
Deposits	$	1,983		$	(82	)	(c)	$	—		$	—		$	1,248	$	(222	)	$	(672	)	$	2,255		$	(88	)	(c)
Other borrowed funds	1,619			(177		)	(c)	—			—			7,108		(6,845		)	369			2,074			291			(c)
Trading liabilities – debt and equity instruments	205			(83		)	(c)	(2,418		)	2,594			—		(54		)	(131		)	113			(100		)	(c)
Accounts payable and other liabilities	—			—				—			—			—		—			—			—			—
Beneficial interests issued by consolidated VIEs	925			174			(c)	—			—			353		(212		)	—			1,240			167			(c)
Long-term debt	8,476			(435		)	(c)	—			—			6,830		(4,362		)	(501		)	10,008			(85		)	(c)

Note: Effective April 1, 2015, the Firm adopted new accounting guidance for certain investments where the Firm measures fair value using the net asset value per share (or its equivalent) as a practical expedient and excluded such investments from the fair value hierarchy. The guidance was required to be applied retrospectively, and accordingly, prior period amounts have been revised to conform with the current period presentation. For further information, see page 190.

(a) All level 3 derivatives are presented on a net basis, irrespective of underlying counterparty.

(b) Level 3 liabilities as a percentage of total Firm liabilities accounted for at fair value (including liabilities measured at fair value on a nonrecurring basis) were 13%, 15% and 18% at December 31, 2015, 2014 and 2013, respectively.

(c) Predominantly reported in principal transactions revenue, except for changes in fair value for CCB mortgage loans, lending-related commitments originated with the intent to sell, and mortgage loan purchase commitments, which are reported in mortgage fees and related income.

(d) Realized gains/(losses) on AFSsecurities, as well as other-than-temporary impairment losses that are recorded in earnings, are reported in securities gains. Unrealized gains/(losses) are reported in OCI. Realized gains/(losses) and foreign exchange remeasurement adjustments recorded in income on AFS securities were $(7) million, $(43) million, and $17 million for the years ended December 31, 2015, 2014 and 2013, respectively. Unrealized gains/(losses) recorded on AFS securities in OCI were $(25) million, $(16) million and $13 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(e) Changes in fair value for CCB MSRs are reported in mortgage fees and related income.

(f) Predominantly reported in other income.

(g) Loan originations are included in purchases.

(h) Includes financial assets and liabilities that have matured, been partially or fully repaid, impacts of modifications, and deconsolidations associated with beneficial interests in VIEs.

(i) All transfers into and/or out of level 3 are assumed to occur at the beginning of the quarterly reporting period in which they occur.

Level 3 analysis

Consolidated balance sheets changes

Level 3 assets (including assets measured at fair value on a nonrecurring basis) were1.4% of total Firm assets at December 31, 2015. The following describes significant changes to level 3 assets since December 31, 2014, for those items measured at fair value on a recurring basis. For further information on changes impacting items measured at fair value on a nonrecurring basis, see Assets and liabilities measured at fair value on a nonrecurring basis onpages 200–201.

For the year ended December 31, 2015

Level 3 assets were $31.2 billion at December 31, 2015, reflecting a decrease of $18.0 billion from December 31, 2014. This decrease was driven by settlements (including repayments and restructurings) and transfers to Level 2 due to an increase in observability and a decrease in the significance of unobservable inputs. In particular:

• $10.6 billion decrease in trading assets — debt and equity instruments was driven by a decrease of $6.7 billion in trading loans due to sales, maturities and transfers from level 3 to level 2 as a result of an increase in observability of certain valuation inputs and a $2.3 billion decrease in corporate debt securities due to transfers from level 3 to level 2 as a result of an increase in observability of certain valuation inputs

• $4.6 billion decrease in gross derivative receivables was driven by a $3.9 billion decrease in equity, interest rate and foreign exchange derivative receivables due to market movements and transfers from level 3 to level 2 as a result of an increase in observability of certain valuation inputs

Gains and losses

The following describes significant components of total realized/unrealized gains/(losses) for instruments measured at fair value on a recurring basis for the years ended December 31, 2015, 2014 and 2013. For further information on these instruments, see Changes in level 3 recurring fair value measurements rollforward tables onpages 195–199.

2015

• $1.6 billion of net gains in interest rate, foreign exchange and equity derivative receivables largely due to market movements; partially offset by loss in commodity derivatives due to market movements

• $1.3 billion of net gains in liabilities due to market movements

2014

• $1.8 billion of losses on MSRs. For further discussion of the change, refer to Note 17

• $1.1 billion of net gains on trading assets — debt and equity instruments, largely driven by market movements and client-driven financing transactions

2013

• $2.9 billion of net gains on derivatives, largely driven by $2.5 billion of gains on equity derivatives, primarily related to client-driven market-making activity and a rise in equity markets; and $1.4 billion of gains, predominantly on interest rate lock and mortgage loan purchase commitments; partially offset by $1.7 billion of losses on credit derivatives from the impact of tightening reference entity credit spreads

• $2.2 billion of net gains on trading assets — debt and equity instruments, largely driven by market making and credit spread tightening in nonagency mortgage-backed securities and trading loans, and the impact of market movements on client-driven financing transactions

• $1.6 billion of net gains on MSRs. For further discussion of the change, refer to Note 17

Credit and funding adjustments

When determining the fair value of an instrument, it may be necessary to record adjustments to the Firm’s estimates of fair value in order to reflect counterparty credit quality, the Firm’s own creditworthiness, and the impact of funding:

• CVA is taken to reflect the credit quality of a counterparty in the valuation of derivatives. Derivatives are generally valued using models that use as their basis observable market parameters. These market parameters may not consider counterparty non-performance risk. Therefore, an adjustment may be necessary to reflect the credit quality of each derivative counterparty to arrive at fair value.

The Firm estimates derivatives CVA using a scenario analysis to estimate the expected credit exposure across all of the Firm’s positions with each counterparty, and then estimates losses as a result of a counterparty credit event. The key inputs to this methodology are (i) the expected positive exposure to each counterparty based on a simulation that assumes the current population of existing derivatives with each counterparty remains unchanged and considers contractual factors designed to mitigate the Firm’s credit exposure, such as collateral and legal rights of offset; (ii) the probability of a default event occurring for each counterparty, as derived from observed or estimated CDS spreads; and (iii) estimated recovery rates implied by CDS, adjusted to consider the differences in recovery rates as a derivative creditor relative to those reflected in CDS spreads, which generally reflect senior unsecured creditor risk. As such, the Firm estimates derivatives CVA relative to the relevant benchmark interest rate.

• DVA is taken to reflect the credit quality of the Firm in the valuation of liabilities measured at fair value. The DVA calculation methodology is generally consistent with the CVA methodology described above and incorporates JPMorgan Chase’s credit spreads as observed through the CDS market to estimate the probability of default and loss given default as a result of a systemic event affecting the Firm. Structured notes DVA is estimated using the current fair value of the structured note as the exposure amount, and is otherwise consistent with the derivative DVA methodology.

• FVA is taken to incorporate the impact of funding in the Firm’s valuation estimates where there is evidence that a market participant in the principal market would incorporate it in a transfer of the instrument. For collateralized derivatives, the fair value is estimated by discounting expected future cash flows at the relevant overnight indexed swap (“OIS”) rate given the underlying collateral agreement with the counterparty. For uncollateralized (including partially collateralized) over-the-counter (“OTC”) derivatives and structured notes, effective in 2013, the Firm implemented a FVA framework to incorporate the impact of funding into its valuation estimates. The Firm’s FVA framework leverages its existing CVA and DVA calculation methodologies, and considers the fact that the Firm’s own credit risk is a significant component of funding costs. The key inputs to FVA are: (i) the expected funding requirements arising from the Firm’s positions with each counterparty and collateral arrangements; (ii) for assets, the estimated market funding cost in the principal market; and (iii) for liabilities, the hypothetical market funding cost for a transfer to a market participant with a similar credit standing as the Firm.

Upon the implementation of the FVA framework in 2013, the Firm recorded a one-time $1.5 billion loss in principal transactions revenue that was recorded in the CIB. While the FVA framework applies to both assets and liabilities, the loss on implementation largely related to uncollateralized derivative receivables given that the impact of the Firm’s own credit risk, which is a significant component of funding costs, was already incorporated in the valuation of liabilities through the application of DVA.

The following table provides the impact of credit and funding adjustments on principal transactions revenue in the respective periods, excluding the effect of any associated hedging activities. The DVA and FVA reported below include the impact of the Firm’s own credit quality on the inception value of liabilities as well as the impact of changes in the Firm’s own credit quality over time.

Year ended December 31, (in millions)	2015		2014			2013
Credit adjustments:
Derivatives CVA	$	620	$	(322	)	$	1,886
Derivatives DVA and FVA(a)	73		(58		)	(1,152		)
Structured notes DVA and FVA(b)	754		200			(760		)

(a) Included derivatives DVA of $(6) million, $(1) million and $(115) million for the years ended December 31, 2015, 2014 and 2013, respectively.

(b) Included structured notes DVA of $171 million, $20 million and $(337) million for the years ended December 31, 2015, 2014 and 2013, respectively.

Assets and liabilities measured at fair value on a nonrecurring basis

AtDecember 31, 2015 and 2014, assets measured at fair value on a nonrecurring basis were$1.7 billion and $4.5 billion, respectively, consisting predominantly of loans that had fair value adjustments for the years ended December 31, 2015 and 2014. At December 31, 2015, $696 million and $959 millionof these assets were classified in levels 2 and 3 of the fair value hierarchy, respectively. At December 31, 2014, $1.3 billion and $3.2 billionof these assets were classified in levels 2 and 3 of the fair value hierarchy, respectively. Liabilities measured at fair value on a nonrecurring basis were not significant at December 31, 2015 and 2014. For the years ended December 31, 2015, 2014 and 2013, there were no significant transfers between levels 1, 2and 3 related to assets held at the balance sheet date.

Of the$959 millionin level 3 assets measured at fair value on a nonrecurring basis as of December 31, 2015:

• $556 millionrelated to residential real estate loans carried at the net realizable value of the underlying collateral (i.e., collateral-dependent loans and other loans charged off in accordance with regulatory guidance). These amounts are classified as level 3, as they are valued using a broker’s price opinion and discounted based upon the Firm’s experience with actual liquidation values. These discounts to the broker price opinions ranged from4% to 59%, with a weighted average of22%.

The total change in the recorded value of assets and liabilities for which a fair value adjustment has been included in the Consolidated statements of income for the years ended December 31, 2015, 2014 and 2013, related to financial instruments held at those dates, were losses of$294 million, $992 million and $789 million, respectively; these reductions were predominantly associated with loans.

For further information about the measurement of impaired collateral-dependent loans, and other loans where the carrying value is based on the fair value of the underlying collateral (e.g., residential mortgage loans charged off in accordance with regulatory guidance), see Note 14.

Additional disclosures about the fair value of financial instruments that are not carried on the Consolidated balance sheets at fair value

U.S. GAAP requires disclosure of the estimated fair value of certain financial instruments, and the methods and significant assumptions used to estimate their fair value. Financial instruments within the scope of these disclosure requirements are included in the following table. However, certain financial instruments and all nonfinancial instruments are excluded from the scope of these disclosure requirements. Accordingly, the fair value disclosures provided in the following table include only a partial estimate of the fair value of JPMorgan Chase’s assets and liabilities. For example, the Firm has developed long-term relationships with its customers through its deposit base and credit card accounts, commonly referred to as core deposit intangibles and credit card relationships. In the opinion of management, these items, in the aggregate, add significant value to JPMorgan Chase, but their fair value is not disclosed in this Note.

Financial instruments for which carrying value approximates fair value

Certain financial instruments that are not carried at fair value on the Consolidated balance sheets are carried at amounts that approximate fair value, due to their short-term nature and generally negligible credit risk. These instruments include cash and due from banks, deposits with banks, federal funds sold, securities purchased under resale agreements and securities borrowed, short-term receivables and accrued interest receivable, commercial paper, federal funds purchased, securities loaned and sold under repurchase agreements, other borrowed funds, accounts payable, and accrued liabilities. In addition, U.S. GAAP requires that the fair value of deposit liabilities with no stated maturity (i.e., demand, savings and certain money market deposits) be equal to their carrying value; recognition of the inherent funding value of these instruments is not permitted.

The following table presents by fair value hierarchy classification the carrying values and estimated fair values atDecember 31, 2015 and 2014, of financial assets and liabilities, excluding financial instruments which are carried at fair value on a recurring basis. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, seepages 185–188of this Note.

	December 31, 2015										December 31, 2014
			Estimated fair value hierarchy										Estimated fair value hierarchy
(in billions)	Carrying value		Level 1		Level 2		Level 3		Total estimated fair value		Carrying value		Level 1		Level 2		Level 3		Total estimated fair value
Financial assets
Cash and due from banks	$	20.5	$	20.5	$	—	$	—	$	20.5	$	27.8	$	27.8	$	—	$	—	$	27.8
Deposits with banks	340.0		335.9		4.1		—		340.0		484.5		480.4		4.1		—		484.5
Accrued interest and accounts receivable	46.6		—		46.4		0.2		46.6		70.1		—		70.0		0.1		70.1
Federal funds sold and securities purchased under resale agreements	189.5		—		189.5		—		189.5		187.2		—		187.2		—		187.2
Securities borrowed	98.3		—		98.3		—		98.3		109.4		—		109.4		—		109.4
Securities, held-to-maturity(a)	49.1		—		50.6		—		50.6		49.3		—		51.2		—		51.2
Loans, net of allowance for loan losses(b)	820.8		—		25.4		802.7		828.1		740.5		—		21.8		723.1		744.9
Other	66.0		0.1		56.3		14.3		70.7		64.7		—		55.7		13.3		69.0
Financial liabilities
Deposits	$	1,267.2	$	—	$	1,266.1	$	1.2	$	1,267.3	$	1,354.6	$	—	$	1,353.6	$	1.2	$	1,354.8
Federal funds purchased and securities loaned or sold under repurchase agreements	149.2		—		149.2		—		149.2		189.1		—		189.1		—		189.1
Commercial paper	15.6		—		15.6		—		15.6		66.3		—		66.3		—		66.3
Other borrowed funds	11.2		—		11.2		—		11.2		15.5				15.5		—		15.5
Accounts payable and other liabilities(c)	144.6		—		141.7		2.8		144.5		172.6		—		169.6		2.9		172.5
Beneficial interests issued by consolidated VIEs(d)	41.1		—		40.2		0.9		41.1		50.2		—		48.2		2.0		50.2
Long-term debt and junior subordinated deferrable interest debentures(e)	255.6		—		257.4		4.3		261.7		246.2		—		251.2		3.8		255.0

(a) Carrying value reflects unamortized discount or premium.

(b) Fair value is typically estimated using a discounted cash flow model that incorporates the characteristics of the underlying loans (including principal, contractual interest rate and contractual fees) and other key inputs, including expected lifetime credit losses, interest rates, prepayment rates, and primary origination or secondary market spreads. For certain loans, the fair value is measured based on the value of the underlying collateral. The difference between the estimated fair value and carrying value of a financial asset or liability is the result of the different methodologies used to determine fair value as compared with carrying value. For example, credit losses are estimated for a financial asset’s remaining life in a fair value calculation but are estimated for a loss emergence period in the allowance for loan loss calculation; future loan income (interest and fees) is incorporated in a fair value calculation but is generally not considered in the allowance for loan losses. For a further discussion of the Firm’s methodologies for estimating the fair value of loans and lending-related commitments, see Valuation hierarchy on pages 185–188.

(c) Certain prior period amounts have been revised to conform with the current presentation.

(d) Carrying value reflects unamortized issuance costs.

(e) Carrying value reflects unamortized premiums and discounts, issuance costs, and other valuation adjustments.

The majority of the Firm’s lending-related commitments are not carried at fair value on a recurring basis on the Consolidated balance sheets, nor are they actively traded. The carrying value of the allowance and the estimated fair value of the Firm’s wholesale lending-related commitments were as follows for the periods indicated.

	December 31, 2015										December 31, 2014
			Estimated fair value hierarchy										Estimated fair value hierarchy
(in billions)	Carrying value(a)		Level 1		Level 2		Level 3		Total estimated fair value		Carrying value(a)		Level 1		Level 2		Level 3		Total estimated fair value
Wholesale lending-related commitments	$	0.8	$	—	$	—	$	3.0	$	3.0	$	0.6	$	—	$	—	$	1.6	$	1.6

(a) Excludes the current carrying values of the guarantee liability and the offsetting asset, each of which are recognized at fair value at the inception of guarantees.

The Firm does not estimate the fair value of consumer lending-related commitments. In many cases, the Firm can reduce or cancel these commitments by providing the borrower notice or, in some cases as permitted by law, without notice. For a further discussion of the valuation of lending-related commitments, seepage 186of this Note.