
	Notional Amounts as of
	September		December
$ in millions	2022		2021
Not accounted for as hedges
Exchange-traded	$	4,112,393	$	2,630,915
OTC-cleared	16,663,199		17,874,504
Bilateral OTC	10,483,366		11,122,871
Total interest rates	31,258,958		31,628,290
Exchange-traded	13		—
OTC-cleared	531,824		463,477
Bilateral OTC	644,885		616,095
Total credit	1,176,722		1,079,572
Exchange-traded	9,312		14,617
OTC-cleared	183,609		194,124
Bilateral OTC	6,094,304		6,606,927
Total currencies	6,287,225		6,815,668
Exchange-traded	421,737		308,917
OTC-cleared	3,492		3,647
Bilateral OTC	270,884		234,322
Total commodities	696,113		546,886
Exchange-traded	1,243,432		1,149,777
OTC-cleared	301		198
Bilateral OTC	1,118,371		1,173,103
Total equities	2,362,104		2,323,078
Subtotal	41,781,122		42,393,494
Accounted for as hedges
OTC-cleared	263,785		219,083
Bilateral OTC	3,426		4,499
Total interest rates	267,211		223,582
OTC-cleared	1,885		2,758
Bilateral OTC	17,988		18,658
Total currencies	19,873		21,416
Exchange-traded	652		1,050
Total commodities	652		1,050
Subtotal	287,736		246,048
Total notional amounts	$	42,068,858	$	42,639,542

In the tables above:

•Gross fair values exclude the effects of both counterparty netting and collateral, and therefore are not representative of the firm’s exposure.

•Where the firm has received or posted collateral under credit support agreements, but has not yet determined such agreements are enforceable, the related collateral has not been netted.

•Notional amounts, which represent the sum of gross long and short derivative contracts, provide an indication of the volume of the firm’s derivative activity and do not represent anticipated losses.

•Total gross fair value of derivatives included derivative assets of $17.12 billion as of September 2022 and $17.48 billion as of December 2021, and derivative liabilities of $16.19 billion as of September 2022 and $17.29 billion as of December 2021, which are not subject to an enforceable netting agreement or are subject to a netting agreement that the firm has not yet determined to be enforceable.

Fair Value of Derivatives by Level

The table below presents derivatives on a gross basis by level and product type, as well as the impact of netting.


$ in millions	Level 1		Level 2		Level 3		Total
As of September 2022
Assets
Interest rates	$	62	$	276,914	$	2,309	$	279,285
Credit	—		11,404		2,811		14,215
Currencies	—		149,107		701		149,808
Commodities	—		64,227		2,158		66,385
Equities	124		64,862		1,495		66,481
Gross fair value	186		566,514		9,474		576,174
Counterparty netting in levels			(417,307)		(1,039)		(418,346)
Subtotal	$	186	$	149,207	$	8,435	$	157,828
Cross-level counterparty netting							(4,029)
Cash collateral netting							(73,678)
Net fair value							$	80,121

Liabilities
Interest rates	$	(14)	$	(256,711)	$	(836)	$	(257,561)
Credit	—		(11,588)		(1,145)		(12,733)
Currencies	—		(147,804)		(576)		(148,380)
Commodities	—		(53,923)		(641)		(54,564)
Equities	(25)		(74,292)		(2,133)		(76,450)
Gross fair value	(39)		(544,318)		(5,331)		(549,688)
Counterparty netting in levels			417,307		1,039		418,346
Subtotal	$	(39)	$	(127,011)	$	(4,292)	$	(131,342)
Cross-level counterparty netting							4,029
Cash collateral netting							56,544
Net fair value							$	(70,769)

As of December 2021
Assets
Interest rates	$	2	$	246,525	$	1,065	$	247,592
Credit	—		12,823		3,433		16,256
Currencies	—		86,773		237		87,010
Commodities	—		34,501		1,044		35,545
Equities	33		72,570		963		73,566
Gross fair value	35		453,192		6,742		459,969
Counterparty netting in levels	—		(329,164)		(804)		(329,968)
Subtotal	$	35	$	124,028	$	5,938	$	130,001
Cross-level counterparty netting							(1,924)
Cash collateral netting							(64,117)
Net fair value							$	63,960

Liabilities
Interest rates	$	(2)	$	(217,438)	$	(882)	$	(218,322)
Credit	—		(14,176)		(1,579)		(15,755)
Currencies	—		(85,925)		(384)		(86,309)
Commodities	—		(31,925)		(606)		(32,531)
Equities	(29)		(77,393)		(2,851)		(80,273)
Gross fair value	(31)		(426,857)		(6,302)		(433,190)
Counterparty netting in levels	—		329,164		804		329,968
Subtotal	$	(31)	$	(97,693)	$	(5,498)	$	(103,222)
Cross-level counterparty netting							1,924
Cash collateral netting							49,345
Net fair value							$	(51,953)

In the table above:

•Gross fair values exclude the effects of both counterparty netting and collateral netting, and therefore are not representative of the firm’s exposure.

•Counterparty netting is reflected in each level to the extent that receivable and payable balances are netted within the same level and is included in counterparty netting in levels. Where the counterparty netting is across levels, the netting is included in cross-level counterparty netting.

•Derivative assets are shown as positive amounts and derivative liabilities are shown as negative amounts.

See Note 4 for an overview of the firm’s fair value measurement policies and the valuation techniques and significant inputs used to determine the fair value of derivatives.

Significant Unobservable Inputs

The table below presents the amount of level 3 derivative assets (liabilities), and ranges, averages and medians of significant unobservable inputs used to value level 3 derivatives.

As of September 2022

As of December 2021

$ in millions, except inputs

Amount or Range

Average/ Median

Amount or Range

Average/ Median

Interest rates, net

1,473

183

Correlation

25% to 81%

64%/63%

25% to 81%

63%/62%

Volatility (bps)

31 to 100

63/61

31 to 100

59/54

Credit, net

1,666

1,854

Credit spreads (bps)

4 to 1,040

188/117

1 to 568

136/107

Upfront credit points

0 to 100

41/34

2 to 100

34/26

Recovery rates

20% to 50%

41%/40%

20% to 50%

37%/40%

Currencies, net

125

(147)

Correlation

20% to 71%

39%/23%

20% to 71%

40%/41%

Volatility

20% to 21%

21%/21%

19% to 19%

19%/19%

Commodities, net

1,517

438

Volatility

25% to 148%

56%/47%

15% to 93%

32%/29%

Natural gas spread

$(3.59) to $8.59

$(0.16)/ $(0.20)

$(1.33) to $2.60

$(0.11)/ $(0.07)

Oil spread

$(5.50) to $48.91

$20.75/ $20.07

$8.64 to $22.68

$13.36/ $12.69

Electricity price

$2.60 to $309.83

$54.13/ $48.43

$1.50 to $289.96

$37.42/ $32.20

Equities, net

(638)

(1,888)

Correlation

(70)% to 100%

64%/66%

(70)% to 99%

59%/62%

Volatility

2% to 89%

16%/13%

3% to 150%

17%/17%

In the table above:

•Derivative assets are shown as positive amounts and derivative liabilities are shown as negative amounts.

•Ranges represent the significant unobservable inputs that were used in the valuation of each type of derivative.

•Averages represent the arithmetic average of the inputs and are not weighted by the relative fair value or notional amount of the respective financial instruments. An average greater than the median indicates that the majority of inputs are below the average. For example, the difference between the average and the median for credit spreads indicates that the majority of the inputs fall in the lower end of the range.

•The ranges, averages and medians of these inputs are not representative of the appropriate inputs to use when calculating the fair value of any one derivative. For example, the highest correlation for interest rate derivatives is appropriate for valuing a specific interest rate derivative but may not be appropriate for valuing any other interest rate derivative. Accordingly, the ranges of inputs do not represent uncertainty in, or possible ranges of, fair value measurements of level 3 derivatives.

•Interest rates, currencies and equities derivatives are valued using option pricing models, credit derivatives are valued using option pricing, correlation and discounted cash flow models, and commodities derivatives are valued using option pricing and discounted cash flow models.

•The fair value of any one instrument may be determined using multiple valuation techniques. For example, option pricing models and discounted cash flow models are typically used together to determine fair value. Therefore, the level 3 balance encompasses both of these techniques.

•Correlation within currencies and equities includes cross-product type correlation.

•Natural gas spread represents the spread per million British thermal units of natural gas.

•Oil spread represents the spread per barrel of oil and refined products.

•Electricity price represents the price per megawatt hour of electricity.

Range of Significant Unobservable Inputs

The following provides information about the ranges of significant unobservable inputs used to value the firm’s level 3 derivative instruments:

•Correlation. Ranges for correlation cover a variety of underliers both within one product type (e.g., equity index and equity single stock names) and across product types (e.g., correlation of an interest rate and a currency), as well as across regions. Generally, cross-product type correlation inputs are used to value more complex instruments and are lower than correlation inputs on assets within the same derivative product type.

•Volatility. Ranges for volatility cover numerous underliers across a variety of markets, maturities and strike prices. For example, volatility of equity indices is generally lower than volatility of single stocks.

•Credit spreads, upfront credit points and recovery rates. The ranges for credit spreads, upfront credit points and recovery rates cover a variety of underliers (index and single names), regions, sectors, maturities and credit qualities (high-yield and investment-grade). The broad range of this population gives rise to the width of the ranges of significant unobservable inputs.

•Commodity prices and spreads. The ranges for commodity prices and spreads cover variability in products, maturities and delivery locations.

Sensitivity of Fair Value Measurement to Changes in Significant Unobservable Inputs

The following is a description of the directional sensitivity of the firm’s level 3 fair value measurements to changes in significant unobservable inputs, in isolation, as of each period-end:

•Correlation. In general, for contracts where the holder benefits from the convergence of the underlying asset or index prices (e.g., interest rates, credit spreads, foreign exchange rates, inflation rates and equity prices), an increase in correlation results in a higher fair value measurement.

•Volatility. In general, for purchased options, an increase in volatility results in a higher fair value measurement.

•Credit spreads, upfront credit points and recovery rates. In general, the fair value of purchased credit protection increases as credit spreads or upfront credit points increase or recovery rates decrease. Credit spreads, upfront credit points and recovery rates are strongly related to distinctive risk factors of the underlying reference obligations, which include reference entity-specific factors, such as leverage, volatility and industry, market-based risk factors, such as borrowing costs or liquidity of the underlying reference obligation, and macroeconomic conditions.

•Commodity prices and spreads. In general, for contracts where the holder is receiving a commodity, an increase in the spread (price difference from a benchmark index due to differences in quality or delivery location) or price results in a higher fair value measurement.

Due to the distinctive nature of each of the firm’s level 3 derivatives, the interrelationship of inputs is not necessarily uniform within each product type.

Level 3 Rollforward

The table below presents a summary of the changes in fair value for level 3 derivatives.


	Three Months Ended September				Nine Months Ended September
$ in millions	2022		2021		2022		2021
Total level 3 derivatives, net
Beginning balance	$	3,174	$	567	$	440	$	1,175
Net realized gains/(losses)	(16)		(33)		456		73
Net unrealized gains/(losses)	1,167		453		4,413		34
Purchases	156		92		216		439
Sales	(232)		(366)		(1,004)		(1,058)
Settlements	491		(264)		50		99
Transfers into level 3	105		(112)		(130)		(79)
Transfers out of level 3	(702)		312		(298)		(34)
Ending balance	$	4,143	$	649	$	4,143	$	649

In the table above:

•Changes in fair value are presented for all derivative assets and liabilities that are classified in level 3 as of the end of the period.

•Net unrealized gains/(losses) relates to instruments that were still held at period-end.

•Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. If a derivative was transferred into level 3 during a reporting period, its entire gain or loss for the period is classified in level 3.

•Positive amounts for transfers into level 3 and negative amounts for transfers out of level 3 represent net transfers of derivative assets. Negative amounts for transfers into level 3 and positive amounts for transfers out of level 3 represent net transfers of derivative liabilities.

•A derivative with level 1 and/or level 2 inputs is classified in level 3 in its entirety if it has at least one significant level 3 input.

•If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e., level 1 and level 2 inputs) is classified in level 3.

•Gains or losses that have been classified in level 3 resulting from changes in level 1 or level 2 inputs are frequently offset by gains or losses attributable to level 1 or level 2 derivatives and/or level 1, level 2 and level 3 trading cash instruments. As a result, gains/(losses) included in the level 3 rollforward below do not necessarily represent the overall impact on the firm’s results of operations, liquidity or capital resources.

The table below presents information, by product type, for derivatives included in the summary table above.


	Three Months Ended September				Nine Months Ended September
$ in millions	2022		2021		2022		2021
Interest rates, net
Beginning balance	$	1,035	$	308	$	183	$	267
Net realized gains/(losses)	(27)		(60)		(98)		(11)
Net unrealized gains/(losses)	411		(56)		1,370		38
Purchases	8		—		55		67
Sales	(1)		(24)		(27)		(72)
Settlements	64		101		111		23
Transfers into level 3	(15)		(20)		(7)		(1)
Transfers out of level 3	(2)		(2)		(114)		(64)
Ending balance	$	1,473	$	247	$	1,473	$	247

Credit, net
Beginning balance	$	2,164	$	1,750	$	1,854	$	1,778
Net realized gains/(losses)	(11)		(22)		36		(33)
Net unrealized gains/(losses)	24		11		92		129
Purchases	64		18		2		62
Sales	(8)		(35)		(40)		(62)
Settlements	(144)		(22)		(105)		(9)
Transfers into level 3	16		15		11		(60)
Transfers out of level 3	(439)		4		(184)		(86)
Ending balance	$	1,666	$	1,719	$	1,666	$	1,719

Currencies, net
Beginning balance	$	(239)	$	(234)	$	(147)	$	(338)
Net realized gains/(losses)	28		9		66		(29)
Net unrealized gains/(losses)	199		43		225		(7)
Purchases	1		1		2		41
Sales	(2)		(5)		(7)		(12)
Settlements	122		36		62		235
Transfers into level 3	2		(4)		(81)		(20)
Transfers out of level 3	14		35		5		11
Ending balance	$	125	$	(119)	$	125	$	(119)

Commodities, net
Beginning balance	$	1,435	$	266	$	438	$	300
Net realized gains/(losses)	(53)		(23)		(29)		(76)
Net unrealized gains/(losses)	209		196		1,264		348
Purchases	5		16		4		38
Sales	(16)		(4)		(23)		(34)
Settlements	(14)		6		(87)		(56)
Transfers into level 3	78		25		172		16
Transfers out of level 3	(127)		31		(222)		(23)
Ending balance	$	1,517	$	513	$	1,517	$	513

Equities, net
Beginning balance	$	(1,221)	$	(1,523)	$	(1,888)	$	(832)
Net realized gains/(losses)	47		63		481		222
Net unrealized gains/(losses)	324		259		1,462		(474)
Purchases	78		57		153		231
Sales	(205)		(298)		(907)		(878)
Settlements	463		(385)		69		(94)
Transfers into level 3	24		(128)		(225)		(14)
Transfers out of level 3	(148)		244		217		128
Ending balance	$	(638)	$	(1,711)	$	(638)	$	(1,711)

Level 3 Rollforward Commentary

Three Months Ended September 2022. The net realized and unrealized gains on level 3 derivatives of $1.15 billion (reflecting $16 million of net realized losses and $1.17 billion of net unrealized gains) for the three months ended September 2022 included gains of $1.14 billion reported in market making and gains of $7 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for the three months ended September 2022 were primarily attributable to gains on certain interest rate derivatives (primarily reflecting the impact of an increase in interest rates), gains on certain equity derivatives (primarily reflecting the impact of a decrease in equity prices), gains on certain commodity derivatives (primarily reflecting the impact of an increase in commodity prices), and gains on certain currency derivatives (primarily reflecting the impact of changes in foreign exchange rates).

The drivers of transfers into level 3 derivatives during the three months ended September 2022 were not material.

Transfers out of level 3 derivatives during the three months ended September 2022 primarily reflected transfers of certain credit derivative assets to level 2 (principally due to certain unobservable credit spread inputs no longer being significant to the net risk of certain portfolios), certain equity derivative assets to level 2 (principally due to increased transparency of certain unobservable volatility inputs used to value these derivatives), and certain commodity derivative assets to level 2 (principally due to certain unobservable natural gas spread and volatility inputs no longer being significant to the valuation of these derivatives).

Nine Months Ended September 2022. The net realized and unrealized gains on level 3 derivatives of $4.87 billion (reflecting $456 million of net realized gains and $4.41 billion of net unrealized gains) for the nine months ended September 2022 included gains of $4.85 billion reported in market making and gains of $16 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for the nine months ended September 2022 were primarily attributable to gains on certain equity derivatives (primarily reflecting the impact of a decrease in equity prices), gains on certain interest rate derivatives (primarily reflecting the impact of an increase in interest rates), and gains on certain commodity derivatives (primarily reflecting the impact of an increase in commodity prices).

Transfers into level 3 derivatives during the nine months ended September 2022 primarily reflected transfers of certain equity derivative liabilities from level 2 (principally due to decreased transparency of certain unobservable volatility inputs used to value these derivatives) and certain currency derivative liabilities from level 2 (principally due to certain unobservable correlation inputs becoming significant to the valuation of these derivatives), partially offset by transfers of certain commodity derivative assets from level 2 (principally due to certain unobservable electricity price inputs becoming significant to the valuation of these derivatives).

Transfers out of level 3 derivatives during the nine months ended September 2022 primarily reflected transfers of certain commodity derivative assets to level 2 (principally due to certain unobservable natural gas spread and volatility inputs no longer being significant to the valuation of these derivatives), certain credit derivative assets to level 2 (principally due to certain unobservable credit spread inputs no longer being significant to the net risk of certain portfolios), and certain interest rate derivative assets to level 2 (principally due to increased transparency of certain unobservable volatility inputs used to value these derivatives), partially offset by transfers of certain equity derivative liabilities to level 2 (principally due to increased transparency of certain unobservable volatility inputs used to value these derivatives).

Three Months Ended September 2021. The net realized and unrealized gains on level 3 derivatives of $420 million (reflecting $33 million of net realized losses and $453 million of net unrealized gains) for the three months ended September 2021 included gains of $405 million reported in market making and $15 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for the three months ended September 2021 were primarily attributable to gains on certain equity derivatives (primarily reflecting the impact of changes in equity prices) and gains on certain commodity derivatives (primarily reflecting the impact of an increase in commodity prices).

Transfers into level 3 derivatives during the three months ended September 2021 primarily reflected transfers of certain equity derivative liabilities from level 2 (principally due to certain unobservable inputs becoming significant to the valuation of these derivatives).

Transfers out of level 3 derivatives during the three months ended September 2021 primarily reflected transfers of certain equity derivative liabilities to level 2 (principally due to increased transparency of certain volatility inputs used to value these derivatives).

Nine Months Ended September 2021. The net realized and unrealized gains on level 3 derivatives of $107 million (reflecting $73 million of net realized gains and $34 million of net unrealized gains) for the nine months ended September 2021 included gains of $62 million reported in market making and $45 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for the nine months ended September 2021 were primarily attributable to gains on certain commodity derivatives (primarily reflecting the impact of an increase in commodity prices) and gains on certain credit derivatives (primarily reflecting the impact of changes in foreign exchange rates), partially offset by losses on certain equity derivatives (primarily reflecting the impact of an increase in equity prices).

The drivers of transfers into level 3 derivatives during the nine months ended September 2021 were not material.

Transfers out of level 3 derivatives during the nine months ended September 2021 primarily reflected transfers of certain equity derivative liabilities to level 2 (principally due to increased transparency of certain volatility inputs used to value these derivatives), partially offset by transfers of certain credit derivative assets to level 2 (principally due to certain unobservable credit spread inputs no longer being significant to the valuation of these derivatives).

OTC Derivatives

The table below presents OTC derivative assets and liabilities by tenor and major product type.


$ in millions	Less than 1 Year		1 - 5 Years		Greater than 5 Years		Total
As of September 2022
Assets
Interest rates	$	12,714	$	17,175	$	53,692	$	83,581
Credit	971		2,908		2,678		6,557
Currencies	25,586		10,152		8,154		43,892
Commodities	17,378		15,744		2,163		35,285
Equities	7,903		5,795		3,674		17,372
Counterparty netting in tenors	(4,306)		(3,971)		(4,572)		(12,849)
Subtotal	$	60,246	$	47,803	$	65,789	$	173,838
Cross-tenor counterparty netting							(26,334)
Cash collateral netting							(73,678)
Total OTC derivative assets							$	73,826

Liabilities
Interest rates	$	17,883	$	24,168	$	18,904	$	60,955
Credit	1,459		2,013		1,603		5,075
Currencies	20,944		11,134		10,412		42,490
Commodities	11,761		10,555		1,049		23,365
Equities	13,020		8,807		3,162		24,989
Counterparty netting in tenors	(4,306)		(3,971)		(4,572)		(12,849)
Subtotal	$	60,761	$	52,706	$	30,558	$	144,025
Cross-tenor counterparty netting							(26,334)
Cash collateral netting							(56,544)
Total OTC derivative liabilities							$	61,147

As of December 2021
Assets
Interest rates	$	6,076	$	11,655	$	61,380	$	79,111
Credit	1,800		2,381		3,113		7,294
Currencies	13,366		6,642		6,570		26,578
Commodities	10,178		7,348		770		18,296
Equities	11,075		6,592		2,100		19,767
Counterparty netting in tenors	(3,624)		(3,357)		(2,673)		(9,654)
Subtotal	$	38,871	$	31,261	$	71,260	$	141,392
Cross-tenor counterparty netting							(18,638)
Cash collateral netting							(64,117)
Total OTC derivative assets							$	58,637

Liabilities
Interest rates	$	3,929	$	10,932	$	34,676	$	49,537
Credit	1,695		3,257		1,841		6,793
Currencies	14,122		6,581		5,580		26,283
Commodities	7,591		6,274		1,763		15,628
Equities	8,268		12,944		3,587		24,799
Counterparty netting in tenors	(3,624)		(3,357)		(2,673)		(9,654)
Subtotal	$	31,981	$	36,631	$	44,774	$	113,386
Cross-tenor counterparty netting							(18,638)
Cash collateral netting							(49,345)
Total OTC derivative liabilities							$	45,403

In the table above:

•Tenor is based on remaining contractual maturity.

•Counterparty netting within the same product type and tenor category is included within such product type and tenor category.

•Counterparty netting across product types within the same tenor category is included in counterparty netting in tenors. Where the counterparty netting is across tenor categories, the netting is included in cross-tenor counterparty netting.

Credit Derivatives

The firm enters into a broad array of credit derivatives to facilitate client transactions and to manage the credit risk associated with market-making and investing and financing activities. Credit derivatives are actively managed based on the firm’s net risk position. Credit derivatives are generally individually negotiated contracts and can have various settlement and payment conventions. Credit events include failure to pay, bankruptcy, acceleration of indebtedness, restructuring, repudiation and dissolution of the reference entity.

The firm enters into the following types of credit derivatives:

•Credit Default Swaps. Single-name credit default swaps protect the buyer against the loss of principal on one or more bonds, loans or mortgages (reference obligations) in the event the issuer of the reference obligations suffers a credit event. The buyer of protection pays an initial or periodic premium to the seller and receives protection for the period of the contract. If there is no credit event, as defined in the contract, the seller of protection makes no payments to the buyer. If a credit event occurs, the seller of protection is required to make a payment to the buyer, calculated according to the terms of the contract.

•Credit Options. In a credit option, the option writer assumes the obligation to purchase or sell a reference obligation at a specified price or credit spread. The option purchaser buys the right, but does not assume the obligation, to sell the reference obligation to, or purchase it from, the option writer. The payments on credit options depend either on a particular credit spread or the price of the reference obligation.

•Credit Indices, Baskets and Tranches. Credit derivatives may reference a basket of single-name credit default swaps or a broad-based index. If a credit event occurs in one of the underlying reference obligations, the protection seller pays the protection buyer. The payment is typically a pro-rata portion of the transaction’s total notional amount based on the underlying defaulted reference obligation. In certain transactions, the credit risk of a basket or index is separated into various portions (tranches), each having different levels of subordination. The most junior tranches cover initial defaults and once losses exceed the notional amount of these junior tranches, any excess loss is covered by the next most senior tranche.

•Total Return Swaps. A total return swap transfers the risks relating to economic performance of a reference obligation from the protection buyer to the protection seller. Typically, the protection buyer receives a floating rate of interest and protection against any reduction in fair value of the reference obligation, and the protection seller receives the cash flows associated with the reference obligation, plus any increase in the fair value of the reference obligation.

The firm economically hedges its exposure to written credit derivatives primarily by entering into offsetting purchased credit derivatives with identical underliers. Substantially all of the firm’s purchased credit derivative transactions are with financial institutions and are subject to stringent collateral thresholds. In addition, upon the occurrence of a specified trigger event, the firm may take possession of the reference obligations underlying a particular written credit derivative, and consequently may, upon liquidation of the reference obligations, recover amounts on the underlying reference obligations in the event of default.

As of September 2022, written credit derivatives had a total gross notional amount of $557.61 billion and purchased credit derivatives had a total gross notional amount of $619.11 billion, for total net notional purchased protection of $61.50 billion. As of December 2021, written credit derivatives had a total gross notional amount of $510.24 billion and purchased credit derivatives had a total gross notional amount of $569.34 billion, for total net notional purchased protection of $59.10 billion. The firm’s written and purchased credit derivatives primarily consist of credit default swaps.

The table below presents information about credit derivatives.


	Credit Spread on Underlier (basis points)
$ in millions	0 - 250		251 - 500		501 - 1,000		Greater than 1,000		Total
As of September 2022
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year	$	114,156	$	2,562	$	17,059	$	4,569	$	138,346
1 - 5 years	263,129		33,493		20,948		12,831		330,401
Greater than 5 years	69,694		12,411		5,345		1,417		88,867
Total	$	446,979	$	48,466	$	43,352	$	18,817	$	557,614

Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting	$	356,426	$	42,279	$	29,204	$	16,637	$	444,546
Other	$	152,001	$	7,669	$	12,077	$	2,815	$	174,562
Fair Value of Written Credit Derivatives
Asset	$	3,459	$	335	$	85	$	39	$	3,918
Liability	2,493		1,813		2,408		3,478		10,192
Net asset/(liability)	$	966	$	(1,478)	$	(2,323)	$	(3,439)	$	(6,274)
As of December 2021
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year	$	120,456	$	6,173	$	1,656	$	4,314	$	132,599
1 - 5 years	305,255		14,328		12,754		3,814		336,151
Greater than 5 years	35,558		3,087		2,529		311		41,485
Total	$	461,269	$	23,588	$	16,939	$	8,439	$	510,235

Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting	$	381,715	$	17,210	$	12,806	$	6,714	$	418,445
Other	$	138,214	$	7,780	$	3,576	$	1,322	$	150,892
Fair Value of Written Credit Derivatives
Asset	$	9,803	$	924	$	318	$	137	$	11,182
Liability	941		123		1,666		1,933		4,663
Net asset/(liability)	$	8,862	$	801	$	(1,348)	$	(1,796)	$	6,519

In the table above:

•Fair values exclude the effects of both netting of receivable balances with payable balances under enforceable netting agreements, and netting of cash received or posted under enforceable credit support agreements, and therefore are not representative of the firm’s credit exposure.

•Tenor is based on remaining contractual maturity.

•The credit spread on the underlier, together with the tenor of the contract, are indicators of payment/performance risk. The firm is less likely to pay or otherwise be required to perform where the credit spread and the tenor are lower.

•Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives that economically hedge written credit derivatives with identical underliers.

•Other purchased credit derivatives represent the notional amount of all other purchased credit derivatives not included in offsetting.

Impact of Credit and Funding Spreads on Derivatives

The firm realizes gains or losses on its derivative contracts. These gains or losses include credit valuation adjustments (CVA) relating to uncollateralized derivative assets and liabilities, which represent the gains or losses (including hedges) attributable to the impact of changes in credit exposure, counterparty credit spreads, liability funding spreads (which include the firm’s own credit), probability of default and assumed recovery. These gains or losses also include funding valuation adjustments (FVA) relating to uncollateralized derivative assets, which represent the gains or losses (including hedges) attributable to the impact of changes in expected funding exposures and funding spreads.

The table below presents information about CVA and FVA.


	Three Months Ended September				Nine Months Ended September
$ in millions	2022		2021		2022		2021
CVA, net of hedges	$	223	$	49	$	523	$	(14)
FVA, net of hedges	(74)		17		(465)		54
Total	$	149	$	66	$	58	$	40

Bifurcated Embedded Derivatives

The table below presents the fair value and the notional amount of derivatives that have been bifurcated from their related borrowings.


	As of
	September		December
$ in millions	2022		2021
Fair value of assets	$	283	$	845
Fair value of liabilities	(263)		(124)
Net asset/(liability)	$	20	$	721
Notional amount	$	8,856	$	10,743

In the table above, derivatives that have been bifurcated from their related borrowings are recorded at fair value and primarily consist of interest rate, equity and commodity products. These derivatives are included in unsecured short- and long-term borrowings, as well as other secured financings, with the related borrowings.

Derivatives with Credit-Related Contingent Features

Certain of the firm’s derivatives have been transacted under bilateral agreements with counterparties who may require the firm to post collateral or terminate the transactions based on changes in the firm’s credit ratings. The firm assesses the impact of these bilateral agreements by determining the collateral or termination payments that would occur assuming a downgrade by all rating agencies. A downgrade by any one rating agency, depending on the agency’s relative ratings of the firm at the time of the downgrade, may have an impact which is comparable to the impact of a downgrade by all rating agencies.

The table below presents information about net derivative liabilities under bilateral agreements (excluding collateral posted), the fair value of collateral posted and additional collateral or termination payments that could have been called by counterparties in the event of a one- or two-notch downgrade in the firm’s credit ratings.


	As of
	September		December
$ in millions	2022		2021
Net derivative liabilities under bilateral agreements	$	36,526	$	34,315
Collateral posted	$	26,751	$	29,214
Additional collateral or termination payments:
One-notch downgrade	$	352	$	345
Two-notch downgrade	$	1,283	$	1,536

Hedge Accounting

The firm applies hedge accounting for (i) interest rate swaps used to manage the interest rate exposure of certain fixed-rate unsecured long- and short-term borrowings and certain fixed-rate certificates of deposit and certain U.S. government securities classified as available-for-sale, (ii) foreign exchange forward contracts used to manage the foreign exchange risk of certain available-for-sale securities, (iii) foreign currency forward contracts and foreign currency-denominated debt used to manage foreign currency exposures on the firm’s net investment in certain non-U.S. operations and (iv) commodity futures contracts used to manage the price risk of certain commodities.

To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged. Additionally, the firm must formally document the hedging relationship at inception and assess the hedging relationship at least on a quarterly basis to ensure the hedging instrument continues to be highly effective over the life of the hedging relationship.

Fair Value Hedges

The firm designates interest rate swaps as fair value hedges of certain fixed-rate unsecured long- and short-term debt and fixed-rate certificates of deposit, and beginning in the second quarter of 2022, of certain U.S. government securities classified as available-for-sale. These interest rate swaps hedge changes in fair value attributable to the designated benchmark interest rate (e.g., London Interbank Offered Rate (LIBOR), Secured Overnight Financing Rate (SOFR) or Overnight Index Swap Rate), effectively converting a substantial portion of these fixed-rate financial instruments into floating-rate financial instruments.

The firm applies a statistical method that utilizes regression analysis when assessing the effectiveness of these hedging relationships in achieving offsetting changes in the fair values of the hedging instrument and the risk being hedged (i.e., interest rate risk). An interest rate swap is considered highly effective in offsetting changes in fair value attributable to changes in the hedged risk when the regression analysis results in a coefficient of determination of 80% or greater and a slope between 80% and 125%.

For qualifying interest rate fair value hedges, gains or losses on derivatives are included in interest income/expense. The change in fair value of the hedged items attributable to the risk being hedged is reported as an adjustment to its carrying value (hedging adjustment) and is also included in interest income/expense. When a derivative is no longer designated as a hedge, any remaining difference between the carrying value and par value of the hedged item is amortized in interest income/expense over the remaining life of the hedged item using the effective interest method. See Note 23 for further information about interest income and interest expense.

The table below presents the gains/(losses) from interest rate derivatives accounted for as hedges and the related hedged items.


	Three Months Ended September				Nine Months Ended September
$ in millions	2022		2021		2022		2021
Investments
Interest rate hedges	$	427	$	—	$	372	$	—
Hedged investments	(409)		—		(357)		—
Gains/(losses)	$	18	$	—	$	15	$	—

Borrowings and deposits
Interest rate hedges	$	(7,820)	$	(1,528)	$	(22,629)	$	(5,459)
Hedged borrowings and deposits	7,741		1,365		22,279		4,991
Gains/(losses)	$	(79)	$	(163)	$	(350)	$	(468)

The table below presents the carrying value of investments, deposits and unsecured borrowings that are designated in an interest rate hedging relationship and the related cumulative hedging adjustment (increase/(decrease)) from current and prior hedging relationships included in such carrying values.


$ in millions	Carrying Value		Cumulative Hedging Adjustment
As of September 2022
Assets
Investments	$	10,174	$	(358)

Liabilities
Deposits	$	7,391	$	(297)
Unsecured short-term borrowings	$	7,553	$	(59)
Unsecured long-term borrowings	$	150,553	$	(15,395)

As of December 2021
Liabilities
Deposits	$	14,131	$	246
Unsecured short-term borrowings	$	2,167	$	5
Unsecured long-term borrowings	$	144,934	$	6,169

In the table above:

•Cumulative hedging adjustment included $5.10 billion as of September 2022 and $5.91 billion as of December 2021 of hedging adjustments from prior hedging relationships that were de-designated and substantially all were related to unsecured long-term borrowings.

•The amortized cost of investments was $10.93 billion as of September 2022.

In addition, cumulative hedging adjustments for items no longer designated in a hedging relationship were $149 million as of September 2022 and $68 million as of December 2021 and were substantially all related to unsecured long-term borrowings.

The firm designates foreign exchange forward contracts as fair value hedges of the foreign exchange risk of non-U.S. government securities classified as available-for-sale. See Note 8 for information about the amortized cost and fair value of such securities. The effectiveness of such hedges is assessed based on changes in spot rates. The gains/(losses) on the hedges (relating to both spot and forward points) and the foreign exchange gains/(losses) on the related available-for-sale securities are included in market making. The net gains/(losses) on hedges and related available-for-sale securities were $3 million (reflecting a gain of $189 million related to hedges and a loss of $186 million on the related hedged available-for-sale securities) for the three months ended September 2022 and were $(25) million (reflecting a gain of $425 million related to hedges and a loss of $450 million on the related hedged available-for-sale securities) for the nine months ended September 2022. The gross and net gains/(losses) were not material for both the three and nine months ended September 2021.

The firm designates commodity futures contracts as fair value hedges of the price risk of certain precious metals included in commodities within trading assets. As of September 2022, the carrying value of such commodities was $627 million and the amortized cost was $664 million, and as of December 2021, the carrying value was $1.05 billion and the amortized cost was $1.02 billion. Changes in spot rates of such commodities are reflected as an adjustment to their carrying value, and the related gains/(losses) on both the commodities and the designated futures contracts are included in market making. The contractual forward points on the designated futures contracts are amortized into earnings ratably over the life of the contract and other gains/(losses) as a result of changes in the forward points are included in other comprehensive income/(loss). The cumulative hedging adjustment was not material as of both September 2022 and December 2021, and the related gains/(losses) were not material for each of the three and nine months ended September 2022 and September 2021.

Net Investment Hedges

The firm seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations through the use of foreign currency forward contracts and foreign currency-denominated debt. For foreign currency forward contracts designated as hedges, the effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts (i.e., based on changes in forward rates). For foreign currency-denominated debt designated as a hedge, the effectiveness of the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or losses on the hedging instruments are included in currency translation.

The table below presents the gains/(losses) from net investment hedging.


	Three Months Ended September				Nine Months Ended September
$ in millions	2022		2021		2022		2021
Hedges:
Foreign currency forward contract	$	1,097	$	373	$	2,310	$	600
Foreign currency-denominated debt	$	551	$	31	$	1,147	$	290

Gains or losses on individual net investments in non-U.S. operations are reclassified from accumulated other comprehensive income/(loss) to other principal transactions in the consolidated statements of earnings when such net investments are sold or substantially liquidated. The gross and net gains and losses on hedges and the related net investments in non-U.S. operations reclassified to earnings from accumulated other comprehensive income/(loss) were not material for each of the three and nine months ended September 2022 and September 2021.

The firm had designated $8.57 billion as of September 2022 and $3.71 billion as of December 2021 of foreign currency-denominated debt, included in unsecured long- and short-term borrowings, as hedges of net investments in non-U.S. subsidiaries.