Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Summary of Gross Fair Values of Individual Derivative Instruments

The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016:



	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet		Net Amount
June 30, 2017:
Derivative Assets:
Interest rate swaps	$	76,667	$	731	$	75,936	$	—	$	75,936
Futures contracts	3,111		—		3,111		—		3,111
Total non-VIE derivative assets	$	79,778	$	731	$	79,047	$	—	$	79,047
Derivative Liabilities:
Credit derivatives	$	9,006	$	—	$	9,006	$	—	$	9,006
Interest rate swaps	83,274		731		82,543		81,129		1,414
Futures contracts	—		—		—		—		—
Total non-VIE derivative liabilities	$	92,280	$	731	$	91,549	$	81,129	$	10,420
Variable Interest Entities Derivative Assets:
Currency swaps	$	65,507	$	—	$	65,507	$	—	$	65,507
Total VIE derivative assets	$	65,507	$	—	$	65,507	$	—	$	65,507
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	2,064,071	$	—	$	2,064,071	$	—	$	2,064,071
Total VIE derivative liabilities	$	2,064,071	$	—	$	2,064,071	$	—	$	2,064,071

December 31, 2016:
Derivative Assets:
Interest rate swaps	$	139,045	$	61,839	$	77,206	$	—	$	77,206
Futures contracts	536		—		536		—		536
Total non-VIE derivative assets	$	139,581	$	61,839	$	77,742	$	—	$	77,742
Derivative Liabilities:
Credit derivatives	$	15,349	$	—	$	15,349	$	—	$	15,349
Interest rate swaps	365,776		61,839		303,937		156,925		147,012
Total non-VIE derivative liabilities	$	381,125	$	61,839	$	319,286	$	156,925	$	162,361
Variable Interest Entities Derivative Assets:
Currency swaps	$	80,407	$	—	$	80,407	$	—	$	80,407
Total VIE derivative assets	$	80,407	$	—	$	80,407	$	—	$	80,407
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	2,078,601	$	—	$	2,078,601	$	—	$	2,078,601
Total VIE derivative liabilities	$	2,078,601	$	—	$	2,078,601	$	—	$	2,078,601

Summary of Location and Amount of Gains and Losses of Derivative Contracts

There were no amounts held representing an obligation to return cash collateral as of June 30, 2017 and December 31, 2016.

The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the three and six months ended June 30, 2017 and 2016:



	Location of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss)	Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
		Three Months Ended June 30,						Six Months Ended June 30,
		2017			2016			2017			2016
Non-VIEs:
Credit derivatives	Net change in fair value of credit derivatives	$	6,624		$	3,955		$	7,676		$	16,821
Non-VIE derivatives:
Interest rate swaps	Net gains (losses) on interest rate derivatives	37,141			(33,326		)	37,249			(110,433		)
Futures contracts	Net gains (losses) on interest rate derivatives	(3,073		)	(3,005		)	(4,695		)	(9,322		)
Total Non-VIE derivatives		34,068			(36,331		)	32,554			(119,755		)
Variable Interest Entities:
Currency swaps	Income (loss) on variable interest entities	(9,951		)	14,366			(14,899		)	26,305
Interest rate swaps	Income (loss) on variable interest entities	34			(437		)	14,530			(158,780		)
Total Variable Interest Entities		(9,917		)	13,929			(369		)	(132,475		)
Total derivative contracts		$	30,775		$	(18,447	)	$	39,861		$	(235,409	)

Summary of Gross Principal Notional Outstanding for CDS Contracts

The following table summarizes the gross principal notional outstanding for CDS contracts, by Ambac rating as of June 30, 2017 and December 31, 2016:



Ambac Rating	June 30, 2017		December 31, 2016
AAA	$	—	$	—
AA	240,850		315,201
A	—		227,146
BBB ⁽¹⁾	142,750		127,250
Below investment grade ⁽²⁾	72,192		67,783
Total	$	455,792	$	737,380


(1)	BBB internal ratings reflect bonds which are of medium grade credit quality with adequate capacity to pay interest and repay principal. Certain protective elements and margins may weaken under adverse economic conditions and changing circumstances. These bonds are more likely than higher rated bonds to exhibit unreliable protection levels over all cycles.


(2)	Below investment grade internal ratings reflect bonds which are of speculative grade credit quality with the adequacy of future margin levels for payment of interest and repayment of principal potentially adversely affected by major ongoing uncertainties or exposure to adverse conditions.

Summarize Information by Major Category of CDS Contracts

The table below summarizes other information related to credit derivatives outstanding as of June 30, 2017 and December 31, 2016:



	June 30, 2017		December 31, 2016
Number of CDS transactions	5		8
Remaining expected weighted-average life of obligations (in years)	5.7		5.2
Gross principal notional outstanding	$	455,792	$	737,380
Net derivative liabilities at fair value	$	9,006	$	15,349

Summary of Notional Amounts of AFS's Trading Derivative Products

As of June 30, 2017 and December 31, 2016 the notional amounts of AFS’s derivatives are as follows:



	Notional
Type of derivative	June 30, 2017		December 31, 2016
Interest rate swaps—receive-fixed/pay-variable	$	579,648	$	973,130
Interest rate swaps—pay-fixed/receive-variable	281,920		1,874,678
US Treasury futures contracts—short	1,105,000		195,000

Variable Interest Entity, Not Primary Beneficiary, Aggregated Disclosure [Member]

Summary of Notional Amounts of AFS's Trading Derivative Products

The notional for VIE derivatives outstanding as of June 30, 2017 and December 31, 2016 are as follows:



	Notional
Type of VIE derivative	June 30, 2017		December 31, 2016
Interest rate swaps—receive-fixed/pay-variable	$	1,428,396	$	1,352,010
Interest rate swaps—pay-fixed/receive-variable	2,409,852		2,300,584
Currency swaps	393,350		312,357
Credit derivatives	12,132		12,059

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details