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Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of uses and disclosure of derivatives 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
118-119
 • Interest rate
Hedge floating-rate assets and liabilities
Cash flow hedge
Corporate
120
 • Foreign exchange
Hedge foreign currency-denominated assets and liabilities
Fair value hedge
Corporate
118-119
 • Foreign exchange
Hedge foreign currency-denominated forecasted revenue and expense
Cash flow hedge
Corporate
120
 • Foreign exchange
Hedge the value of the Firm’s investments in non-U.S. dollar functional currency entities
Net investment hedge
Corporate
121
 • Commodity
Hedge commodity inventory
Fair value hedge
CIB
118-119
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
121
 • Credit
Manage the credit risk of wholesale lending exposures
Specified risk management
CIB
121
 • Interest rate and
foreign exchange
Manage the risk of certain other specified assets and liabilities
Specified risk management
Corporate
121
Market-making derivatives and other activities:
 
 
 
 • Various
Market-making and related risk management
Market-making and other
CIB
121
 • Various
Other derivatives
Market-making and other
CIB, Corporate
121
Notional amount of derivative contracts The following table summarizes the notional amount of derivative contracts outstanding as of September 30, 2018, and December 31, 2017.
 
Notional amounts(b)
(in billions)
September 30, 2018

December 31, 2017

Interest rate contracts
 
 
Swaps
$
25,236

$
21,043

Futures and forwards
7,326

4,904

Written options
4,718

3,576

Purchased options
5,233

3,987

Total interest rate contracts
42,513

33,510

Credit derivatives(a)
1,603

1,522

Foreign exchange contracts
 
 
Cross-currency swaps
3,893

3,953

Spot, futures and forwards
6,812

5,923

Written options
961

786

Purchased options
956

776

Total foreign exchange contracts
12,622

11,438

Equity contracts
 
 
Swaps
402

367

Futures and forwards
106

90

Written options
596

531

Purchased options
543

453

Total equity contracts
1,647

1,441

Commodity contracts
 
 
Swaps
140

116

Spot, futures and forwards
164

168

Written options
157

98

Purchased options
134

93

Total commodity contracts
595

475

Total derivative notional amounts
$
58,980

$
48,386

(a)
For more information on volumes and types of credit derivative contracts, refer to the Credit derivatives discussion on page 122.
(b)
Represents the sum of gross long and gross short third-party notional derivative contracts.
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, 2018, and December 31, 2017, 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, 2018
(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
$
260,636

 
$
823

 
$
261,459

 
$
23,397

 
$
234,232

 
$
1

 
$
234,233

 
$
7,091

Credit
23,505

 
—

 
23,505

 
582

 
23,360

 
—

 
23,360

 
1,452

Foreign exchange
188,261

 
623

 
188,884

 
17,043

 
176,771

 
848

 
177,619

 
12,402

Equity
46,932

 
—

 
46,932

 
10,104

 
51,355

 
—

 
51,355

 
11,978

Commodity
22,175

 
193

 
22,368

 
8,936

 
22,749

 
90

 
22,839

 
8,770

Total fair value of trading assets and liabilities
$
541,509

 
$
1,639

 
$
543,148

 
$
60,062

 
$
508,467

 
$
939

 
$
509,406

 
$
41,693

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross derivative receivables
 
 
 
Gross derivative payables
 
 
December 31, 2017
(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
$
314,962

(c) 
$
1,030

(c) 
$
315,992

 
$
24,673

 
$
284,433

(c) 
$
3

(c) 
$
284,436

 
$
7,129

Credit
23,205

 
—

 
23,205

 
869

 
23,252

 
—

 
23,252

 
1,299

Foreign exchange
159,740

 
491

 
160,231

 
16,151

 
154,601

 
1,221

 
155,822

 
12,473

Equity
40,040

 
—

 
40,040

 
7,882

 
45,395

 
—

 
45,395

 
9,192

Commodity
20,066

 
19

 
20,085

 
6,948

 
21,498

 
403

 
21,901

 
7,684

Total fair value of trading assets and liabilities
$
558,013

(c) 
$
1,540

(c) 
$
559,553

 
$
56,523

 
$
529,179

(c) 
$
1,627

(c) 
$
530,806

 
$
37,777


(a)
Balances exclude structured notes for which the fair value option has been elected. Refer to Note 3 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.
(c)
The prior period amounts have been revised to conform with the current period presentation.
Offsetting assets The following tables present, as of September 30, 2018, and December 31, 2017, gross and net derivative receivables and payables by contract and settlement type. Derivative receivables and payables, as well as the related cash collateral from the same counterparty have been netted on the Consolidated balance sheets where 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, amounts are not eligible for netting on the Consolidated balance sheets, and those derivative receivables and payables are shown separately in the tables below.
In addition to the cash collateral received and transferred that is presented on a net basis with 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:
•
collateral that consists of non-cash financial instruments (generally U.S. government and agency securities and other G7 government securities) and cash collateral held at third party custodians, which are shown separately as “Collateral not nettable on the Consolidated balance sheets” in the tables below, up to the fair value exposure amount.
•
the amount of collateral held or transferred that exceeds the fair value exposure at the individual counterparty level, as of the date presented, which is excluded from the tables below; and
•
collateral held or transferred that relates to derivative receivables or payables where an appropriate legal opinion has not been either sought or obtained with respect to the master netting agreement, which is excluded from the tables below.
 
September 30, 2018
 
December 31, 2017
(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:
 
 
 
 
 
 
 
 
 
 
Over-the-counter (“OTC”)
$
250,181

$
(230,533
)
 
$
19,648

 
$
305,569

 
$
(284,917
)
 
$
20,652

OTC–cleared
7,512

(7,374
)
 
138

 
6,531

 
(6,318
)
 
213

Exchange-traded(a)
300

(155
)
 
145

 
185

 
(84
)
 
101

Total interest rate contracts
257,993

(238,062
)
 
19,931

 
312,285

 
(291,319
)
 
20,966

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
12,502

(12,153
)
 
349

 
15,390

 
(15,165
)
 
225

OTC–cleared
10,806

(10,770
)
 
36

 
7,225

 
(7,170
)
 
55

Total credit contracts
23,308

(22,923
)
 
385

 
22,615

 
(22,335
)
 
280

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
184,421

(171,163
)
 
13,258

 
155,289

 
(142,420
)
 
12,869

OTC–cleared
676

(659
)
 
17

 
1,696

 
(1,654
)
 
42

Exchange-traded(a)
42

(19
)
 
23

 
141

 
(7
)
 
134

Total foreign exchange contracts
185,139

(171,841
)
 
13,298

 
157,126

 
(144,081
)
 
13,045

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
25,197

(22,380
)
 
2,817

 
22,024

 
(19,917
)
 
2,107

Exchange-traded(a)
16,789

(14,448
)
 
2,341

 
14,188

 
(12,241
)
 
1,947

Total equity contracts
41,986

(36,828
)
 
5,158

 
36,212

 
(32,158
)
 
4,054

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
12,497

(4,916
)
 
7,581

 
10,903

 
(4,436
)
 
6,467

Exchange-traded(a)
9,198

(8,516
)
 
682

 
8,854

 
(8,701
)
 
153

Total commodity contracts
21,695

(13,432
)
 
8,263

 
19,757

 
(13,137
)
 
6,620

Derivative receivables with appropriate legal opinion
530,121

(483,086
)
(b) 
47,035

 
547,995

 
(503,030
)
(b) 
44,965

Derivative receivables where an appropriate legal opinion has not been either sought or obtained
13,027

 
 
13,027

 
11,558

 
 
 
11,558

Total derivative receivables recognized on the Consolidated balance sheets
$
543,148

 
 
$
60,062

 
$
559,553

 
 
 
$
56,523

Collateral not nettable on the Consolidated balance sheets(c)(d)
 
 
 
(13,826
)
 
 
 
 
 
(13,363
)
Net amounts
 
 
 
$
46,236

 
 
 
 
 
$
43,160
Offsetting liabilities
 
September 30, 2018
 
December 31, 2017
(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
$
225,999

$
(220,369
)
 
$
5,630

 
$
276,960

 
$
(271,294
)
 
$
5,666

OTC–cleared
6,650

(6,618
)
 
32

 
6,004

 
(5,928
)
 
76

Exchange-traded(a)
172

(155
)
 
17

 
127

 
(84
)
 
43

Total interest rate contracts
232,821

(227,142
)
 
5,679

 
283,091

 
(277,306
)
 
5,785

Credit contracts:
 
 
 
 
 
 
 
 
 
 
OTC
13,133

(11,852
)
 
1,281

 
16,194

 
(15,170
)
 
1,024

OTC–cleared
10,062

(10,056
)
 
6

 
6,801

 
(6,784
)
 
17

Total credit contracts
23,195

(21,908
)
 
1,287

 
22,995

 
(21,954
)
 
1,041

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
OTC
173,389

(164,557
)
 
8,832

 
150,966

 
(141,789
)
 
9,177

OTC–cleared
679

(654
)
 
25

 
1,555

 
(1,553
)
 
2

Exchange-traded(a)
25

(6
)
 
19

 
98

 
(7
)
 
91

Total foreign exchange contracts
174,093

(165,217
)
 
8,876

 
152,619

 
(143,349
)
 
9,270

Equity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
28,618

(24,869
)
 
3,749

 
28,193

 
(23,969
)
 
4,224

Exchange-traded(a)
16,234

(14,508
)
 
1,726

 
12,720

 
(12,234
)
 
486

Total equity contracts
44,852

(39,377
)
 
5,475

 
40,913

 
(36,203
)
 
4,710

Commodity contracts:
 
 
 
 
 
 
 
 
 
 
OTC
13,607

(5,600
)
 
8,007

 
12,645

 
(5,508
)
 
7,137

Exchange-traded(a)
8,558

(8,469
)
 
89

 
8,870

 
(8,709
)
 
161

Total commodity contracts
22,165

(14,069
)
 
8,096

 
21,515

 
(14,217
)
 
7,298

Derivative payables with appropriate legal opinion
497,126

(467,713
)
(b) 
29,413

 
521,133

 
(493,029
)
(b) 
28,104

Derivative payables where an appropriate legal opinion has not been either sought or obtained
12,280

 
 
12,280

 
9,673

 
 
 
9,673

Total derivative payables recognized on the Consolidated balance sheets
$
509,406

 
 
$
41,693

 
$
530,806

 
 
 
$
37,777

Collateral not nettable on the Consolidated balance sheets(c)(d)
 
 
 
(3,566
)
 
 
 
 
 
(4,180
)
Net amounts
 
 
 
$
38,127

 
 
 
 
 
$
33,597

(a)
Exchange-traded derivative balances that relate to futures contracts are settled daily.
(b)
Net derivatives receivable included cash collateral netted of $55.5 billion at both September 30, 2018, and December 31, 2017, respectively. Net derivatives payable included cash collateral netted of $40.1 billion and $45.5 billion related to OTC and OTC-cleared derivatives at September 30, 2018, and December 31, 2017, respectively.
(c)
Represents liquid security collateral as well as cash collateral held at third party custodians related to derivative instruments where an appropriate legal opinion has been obtained. 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.
(d)
Derivative collateral relates only to OTC and OTC-cleared derivative instruments.
Current credit risk of derivative receivables and liquidity risk of derivative payables 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, 2018, and
December 31, 2017.
OTC and OTC-cleared derivative payables containing downgrade triggers
(in millions)
September 30, 2018

December 31, 2017

Aggregate fair value of net derivative payables
$
10,103

$
11,916

Collateral posted
8,926

9,973

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, 2018, and December 31, 2017, 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), nor 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, 2018
 
December 31, 2017
(in millions)
Single-notch downgrade
Two-notch downgrade
 
Single-notch downgrade
Two-notch downgrade
Amount of additional collateral to be posted upon downgrade(a)
$
116

$
2,046

 
$
79

$
1,989

Amount required to settle contracts with termination triggers upon downgrade(b)
317

861

 
320

650

(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.
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 pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the three and nine months ended September 30, 2018 and 2017, respectively. The Firm includes gains/(losses) on the hedging derivative in the same line item in the Consolidated statements of income as the related hedged item.
 
Gains/(losses) recorded in income
 
Income statement impact of
excluded components(f)
 
OCI impact
Three months ended September 30, 2018
(in millions)
Derivatives
Hedged items
Income statement impact
 
Amortization approach
Changes in fair value
 
Derivatives - Gains/(losses) recorded in OCI(g)
Contract type
 
 
 
 
 
 
 
 
Interest rate(a)(b)
$
(870
)
$
1,032

$
162

 
$
—

$
160

 
$
—

Foreign exchange(c)
277

(165
)
112

 
(137
)
112

 
45

Commodity(d)
454

(461
)
(7
)
 
—

(5
)
 
—

Total
$
(139
)
$
406

$
267

 
$
(137
)
$
267

 
$
45

 
Gains/(losses) recorded in income
 
Income statement impact due to:
 
 
Three months ended September 30, 2017
(in millions)
Derivatives
Hedged items
Income statement impact
 
Hedge ineffectiveness(e)
Excluded components(f)
 
 
Contract type
 
 
 
 
 
 
 
 
Interest rate(a)(b)
$
22

$
182

$
204

 
$
(2
)
$
206

 
 
Foreign exchange(c)
(982
)
1,002

20

 
—

20

 
 
Commodity(d)
(457
)
461

4

 
4

—

 
 
Total
$
(1,417
)
$
1,645

$
228

 
$
2

$
226

 
 
 
Gains/(losses) recorded in income
 
Income statement impact of
excluded components(f)
 
OCI impact
Nine months ended September 30, 2018
(in millions)
Derivatives
Hedged items
Income statement impact
 
Amortization approach
Changes in fair value
 
Derivatives - Gains/(losses) recorded in OCI(g)
Contract type
 
 
 
 
 
 
 
 
Interest rate(a)(b)
$
(2,747
)
$
3,214

$
467

 
$
—

$
459

 
$
—

Foreign exchange(c)
797

(452
)
345

 
(404
)
345

 
(96
)
Commodity(d)
649

(626
)
23

 
—

29

 
—

Total
$
(1,301
)
$
2,136

$
835

 
$
(404
)
$
833

 
$
(96
)
 
Gains/(losses) recorded in income
 
Income statement impact due to:
 
 
Nine months ended September 30, 2017
(in millions)
Derivatives
Hedged items
Income statement impact
 
Hedge ineffectiveness(e)
Excluded components(f)
 
 
Contract type
 
 
 
 
 
 
 
 
Interest rate(a)(b)
$
(131
)
$
759

$
628

 
$
(16
)
$
644

 
 
Foreign exchange(c)
(3,254
)
3,235

(19
)
 
—

(19
)
 
 
Commodity(d)
(823
)
861

38

 
23

15

 
 
Total
$
(4,208
)
$
4,855

$
647

 
$
7

$
640

 
 

(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)
Excludes the amortization expense associated with the inception hedge accounting adjustment applied to the hedged item. This expense is recorded in net interest income and substantially offsets the income statement impact of the excluded components. Also excludes the accrual of interest on interest rate swaps and the related hedged items.
(c)
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 and the income statement impact of excluded components were recorded primarily in principal transactions revenue and net interest income.
(d)
Consists of overall fair value hedges of physical commodities inventories that are generally carried at the lower of cost or net realizable value (net realizable value approximates fair value). Gains and losses were recorded in principal transactions revenue.
(e)
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.
(f)
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, time values and cross-currency basis spreads. Under the new hedge accounting guidance, the initial amount of the excluded components may be amortized into income over the life of the derivative, or changes in fair value may be recognized in current period earnings.
(g)
Represents the change in value of amounts excluded from the assessment of effectiveness under the amortization approach, predominantly cross-currency basis spreads. The amount excluded at inception of the hedge is recognized in earnings over the life of the derivative.
Schedule of amounts recorded on Consolidated Balance Sheets related to certain cumulative fair value hedge basis adjustments As of September 30, 2018, the following amounts were recorded on the Consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the income statement in future periods as an adjustment to yield.
 
 
Carrying amount of the hedged items(a)(b)
 
Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items:

September 30, 2018
(in millions)
 
 
Active hedging relationships
Discontinued hedging relationships(d)
Total
Assets
 
 
 
 
 
 
Investment securities - AFS

 
$
47,896

(c) 
$
(2,292
)
$
438

$
(1,854
)
Liabilities
 
 
 
 
 
 
Long-term debt
 
$
135,239

 
$
(2,693
)
$
(5
)
$
(2,698
)
Beneficial interests issued by consolidated VIEs
 
6,976

 
—

(42
)
(42
)
(a)
Excludes physical commodities with a carrying value of $4.6 billion to which the Firm applies fair value hedge accounting. As a result of the application of hedge accounting, these inventories are carried at fair value, thus recognizing unrealized gains and losses in current periods. Given the Firm exits these positions at fair value, there is no incremental impact to net income in future periods.
(b)
Excludes hedged items where only foreign currency risk is the designated hedged risk, as basis adjustments related to foreign currency hedges will not reverse through the income statement in future periods. The carrying amount excluded for available-for-sale securities is $14.7 billion and for long-term debt is $7.2 billion.
(c)
Carrying amount represents the amortized cost.
(d)
Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.
Cash flow hedge gains and losses The following tables present derivative instruments, by contract type, used in cash flow hedge accounting relationships, and the pre-tax gains/(losses) recorded on such derivatives, for the three and nine months ended September 30, 2018 and 2017, respectively. The Firm includes the gain/(loss) on the hedging derivative in the same line item in the Consolidated statements of income as the change in cash flows on the related hedged item.
 
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended September 30, 2018
(in millions)
Amounts reclassified from AOCI to income
Amounts recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
Interest rate(a)
$
10

$
(30
)
$
(40
)
Foreign exchange(b)
(19
)
(92
)
(73
)
Total
$
(9
)
$
(122
)
$
(113
)
 
 
 
 
 
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Three months ended September 30, 2017
(in millions)
Amounts reclassified from AOCI to income
Amounts recorded in OCI(c)
Total change
in OCI
for period
Contract type
 
 
 
Interest rate(a)
$
1

$
(1
)
$
(2
)
Foreign exchange(b)
(11
)
30

41

Total
$
(10
)
$
29

$
39

 
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Nine months ended September 30, 2018
(in millions)
Amounts reclassified from AOCI to income
Amounts recorded in OCI
Total change
in OCI
for period
Contract type
 
 
 
Interest rate(a)
$
36

$
(141
)
$
(177
)
Foreign exchange(b)
26

(224
)
(250
)
Total
$
62

$
(365
)
$
(427
)
 
 
 
 
 
Derivatives gains/(losses) recorded in income and other comprehensive income/(loss)
Nine months ended September 30, 2017
(in millions)
Amounts reclassified from AOCI to income
Amounts recorded in OCI(c)
Total change
in OCI
for period
Contract type
 
 
 
Interest rate(a)
$
(16
)
$
11

$
27

Foreign exchange(b)
(144
)
100

244

Total
$
(160
)
$
111

$
271

(a)
Primarily consists of benchmark interest rate hedges of LIBOR-indexed floating-rate assets and floating-rate liabilities. Gains and losses were recorded in net interest income.
(b)
Primarily consists of hedges of the foreign currency risk of non-U.S. dollar-denominated revenue and expense. The income statement classification of gains and losses follows the hedged item – primarily noninterest revenue and compensation expense.
(c)
Represents the effective portion of changes in value of the related hedging derivative. 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. The Firm did not recognize any ineffectiveness on cash flow hedges during the three and nine months ended September 30, 2017.
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 pre-tax gains/(losses) recorded on such instruments for the three and nine months ended September 30, 2018 and 2017.
 
2018
 
2017
Three months ended September 30,
(in millions)
Amounts recorded in
income(a)(c)
Amounts recorded in OCI
 
Amounts recorded in
income(a)(c)
Amounts recorded in OCI(b)
Foreign exchange derivatives
 
$
2

 
$
311

 
 
$
(39
)
 
$
(286
)
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
Nine months ended September 30,
(in millions)
Amounts recorded in
income(a)(c)
Amounts recorded in OCI
 
Amounts recorded in
income(a)(c)
Amounts recorded in OCI(b)
Foreign exchange derivatives
 
$
(5
)
 
$
1,126

 
 
$
(150
)
 
$
(1,161
)
(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. The Firm elects to record changes in fair value of these amounts directly in other income.
(b)
Represents the effective portion of changes in value of the related hedging derivative. The Firm did not recognize any ineffectiveness on net investment hedges directly in income during the three and nine months ended September 30, 2017.
(c)
Excludes amounts reclassified from AOCI to income on the sale or liquidation of hedged entities. For additional information, refer to Note 17.
Risk management derivatives gains and losses (not designated as hedging instruments) The following table presents pre-tax 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, and foreign currency-denominated assets and liabilities.
 
Derivatives gains/(losses)
recorded in income
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2018
2017
 
2018
2017
Contract type
 
 
 
 
 
Interest rate(a)
$
(42
)
$
97

 
$
(277
)
$
318

Credit(b)
(7
)
(18
)
 
(17
)
(70
)
Foreign exchange(c)
52

(18
)
 
152

(52
)
Total
$
3

$
61

 
$
(142
)
$
196


(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 derivatives used to mitigate foreign exchange risk of specified foreign currency-denominated assets and liabilities. Gains and losses were recorded in principal transactions revenue.
Credit derivatives table Total credit derivatives and credit-related notes
 
Maximum payout/Notional amount
September 30, 2018 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
Credit derivatives
 
 
 
 
 
 
Credit default swaps
$
(746,195
)
 
$
754,889

$
8,694

 
$
6,341

Other credit derivatives(a)
(38,928
)
 
45,393

6,465

 
11,563

Total credit derivatives
(785,123
)
 
800,282

15,159

 
17,904

Credit-related notes
(18
)
 
—

(18
)
 
7,653

Total
$
(785,141
)
 
$
800,282

$
15,141

 
$
25,557

 
 
 
 
 
 
 
 
Maximum payout/Notional amount
December 31, 2017 (in millions)
Protection sold
Protection
purchased with
identical underlyings(b)
Net protection (sold)/purchased(c)
 
Other protection purchased(d)
Credit derivatives
 
 
 
 
 
 
Credit default swaps
$
(690,224
)
 
$
702,098

$
11,874

 
$
5,045

Other credit derivatives(a)
(54,157
)
 
59,158

5,001

 
11,747

Total credit derivatives
(744,381
)
 
761,256

16,875

 
16,792

Credit-related notes
(18
)
 
—

(18
)
 
7,915

Total
$
(744,399
)
 
$
761,256

$
16,857

 
$
24,707

(a)
Other credit derivatives largely 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.
Protection sold - credit derivatives and credit-related notes ratings/maturity profile The following tables summarize the notional amounts by the ratings, maturity profile, and total fair value, of credit derivatives and credit-related notes as of September 30, 2018, and December 31, 2017, 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, 2018
(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
$
(116,930
)
 
$
(364,470
)
 
$
(71,226
)
 
$
(552,626
)
 
$
8,043

 
$
(1,859
)
 
$
6,184

Noninvestment-grade
(53,103
)
 
(147,117
)
 
(32,295
)
 
(232,515
)
 
8,337

 
(4,519
)
 
3,818

Total
$
(170,033
)
 
$
(511,587
)
 
$
(103,521
)
 
$
(785,141
)
 
$
16,380

 
$
(6,378
)
 
$
10,002

December 31, 2017
(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
$
(159,286
)
 
$
(319,726
)
 
$
(39,429
)
 
$
(518,441
)
 
$
8,516

 
$
(1,134
)
 
$
7,382

Noninvestment-grade
(73,394
)
 
(134,125
)
 
(18,439
)
 
(225,958
)
 
7,407

 
(5,313
)
 
2,094

Total
$
(232,680
)
 
$
(453,851
)
 
$
(57,868
)
 
$
(744,399
)
 
$
15,923

 
$
(6,447
)
 
$
9,476


(a)
The ratings scale is primarily based on external credit ratings defined by S&P and Moody’s.
(b)
Amounts are shown on a gross basis, before the benefit of legally enforceable master netting agreements and cash collateral received by the Firm.