Fair Value

Fair-Value Measurements:

We carry trading account assets, investment securities available for sale and various types of derivative financial instruments at fair value in our consolidated statement of condition on a recurring basis. Changes in the fair values of these financial assets and liabilities are recorded either as components of our consolidated statement of income or as components of accumulated other comprehensive income within shareholders' equity in our consolidated statement of condition.

We measure fair value for the above-described financial assets and liabilities in accordance with GAAP that governs the measurement of the fair value of financial instruments. Management believes that its valuation techniques and underlying assumptions used to measure fair value conform to the provisions of GAAP. We categorize the financial assets and liabilities that we carry at fair value based on a prescribed three-level valuation hierarchy. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to valuation methods using significant unobservable inputs (level 3). If the inputs used to measure a financial asset or liability cross different levels of the hierarchy, categorization is based on the lowest-level input that is most significant to the fair-value measurement. Management's assessment of the significance of a particular input to the overall fair-value measurement of a financial asset or liability requires judgment, and considers factors specific to that asset or liability. The three valuation levels are described below.

Level 1. Financial assets and liabilities with values based on unadjusted quoted prices for identical assets or liabilities in an active market. Fair value is measured using unadjusted quoted prices in active markets for identical securities. Our level-1 financial assets and liabilities primarily include positions in U.S. government securities and highly liquid U.S. and non-U.S. government fixed-income securities. We may carry U.S. government securities in our available-for-sale portfolio in connection with our asset-and-liability management activities. Our level-1 financial assets also include active exchange-traded equity securities.

Level 2. Financial assets and liabilities with values based on 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 asset or liability. Level-2 inputs include the following:


•	Quoted prices for similar assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in non-active markets;


•	Pricing models whose inputs are observable for substantially the full term of the asset or liability; and


•	Pricing models whose inputs are derived principally from, or corroborated by, observable market information through correlation or other means for substantially the full term of the asset or liability.

Our level-2 financial assets and liabilities primarily include trading account assets and fixed-income investment securities, as well as various types of foreign exchange and interest-rate derivative instruments.

Fair value for our investment securities categorized in level 2 is measured primarily using information obtained from independent third parties. This third-party information is subject to review by management as part of a validation process, which includes obtaining an understanding of the underlying assumptions and the level of market participant information used to support those assumptions. In addition, management compares significant assumptions used by third parties to available market information. Such information may include known trades or, to the extent that trading activity is limited, comparisons to market research information pertaining to credit expectations, execution prices and the timing of cash flows, and where information is available, back-testing.

Derivative instruments categorized in level 2 predominantly represent foreign exchange contracts used in our trading activities, for which fair value is measured using discounted cash-flow techniques, with inputs consisting of observable spot and forward points, as well as observable interest-rate curves. With respect to derivative instruments, we evaluate the impact on valuation of the credit risk of our counterparties and our own credit risk. We consider factors such as the likelihood of default by us and our counterparties, our current and potential future net exposures and remaining maturities in determining the fair value. Valuation adjustments associated with derivative instruments were not material to those instruments in the three and six months ended June 30, 2013 or 2012.

Level 3. Financial assets and liabilities with values based on prices or valuation techniques that require inputs that are both unobservable in the market and significant to the overall measurement of fair value. These inputs reflect management's judgment about the assumptions that a market participant would use in pricing the financial asset or liability, and are based on the best available information, some of which is internally developed. The following provides a more detailed discussion of our financial assets and liabilities that we may categorize in level 3 and the related valuation methodology.

•

The fair value of our investment securities categorized in level 3 is measured using information obtained from third-party sources, typically non-binding broker or dealer quotes, or through the use of internally-developed pricing models. Management has evaluated its methodologies used to measure fair value, but has considered the level of observable market information to be insufficient to categorize the securities in level 2.


•	The fair value of foreign exchange contracts, primarily options, is measured using an option-pricing model. Because of a limited number of observable transactions, certain model inputs are not observable, such as implied volatility surface, but are derived from observable market information.


•	The fair value of certain interest-rate caps with long-dated maturities, is measured using a matrix-pricing approach. Observable market prices are not available for these derivatives, so extrapolation is necessary to value these instruments, since they have a strike and/or maturity outside of the matrix.

Our level-3 financial assets and liabilities are similar in structure and profile to our level-1 and level-2 financial instruments, but they trade in less-liquid markets, and the measurement of their fair value is inherently more difficult. As of June 30, 2013, on a gross basis, we categorized in level 3 approximately 6% and 1% of our financial assets and liabilities, respectively, carried at fair value on a recurring basis. We generally determine the fair value of our level-3 financial assets and liabilities using pricing information obtained from third-party sources, typically non-binding broker and dealer quotes, and, to a lesser extent, using internally-developed pricing models. The fair value of investment securities categorized in level 3 that was measured using non-binding quotes and internally-developed pricing-model inputs composed approximately 97% and 3%, respectively, of the total fair value of the investment securities categorized in level 3 as of June 30, 2013.

The process used to measure the fair value of our level-3 financial assets and liabilities is overseen by a valuation group within Corporate Finance, independent of the business units that carry the assets and liabilities. This function, which develops and manages the valuation process, reports to State Street's Valuation Committee. The Valuation Committee, composed of senior management from independent business units, Enterprise Risk Management and Corporate Finance, oversees adherence to State Street's valuation policies.

The valuation group performs independent validation of the pricing information obtained from third-party sources in order to evaluate reasonableness and consistency with market experience in similar asset classes. Monthly analyses include a review of price changes relative to overall trends, credit analysis and other relevant procedures (discussed below). In addition, prices for level-3 securities carried in our investment portfolio are tested on a sample basis based on unexpected pricing movements. These sample prices are then corroborated through price recalculations, when applicable, using available market information, which is obtained independent of the third-party pricing source. The recalculated prices are compared to market-research information pertaining to credit expectations, execution prices and the timing of cash flows, and where information is available, back-testing. If a difference is identified and it is determined that there is a significant impact requiring an adjustment, the adjustment is presented to the Valuation Committee for review and consideration.

Independent validation is also performed on fair-value measurements determined using internally-developed pricing models. The pricing models are subject to independent validation through our Model Assessment Committee, a corporate risk oversight committee that provides technical support and input to the Valuation Committee. This validation process incorporates a review of a diverse set of model and trade parameters across a broad range of values in order to evaluate the model's suitability for valuation of a particular financial instrument type, as well as the model's accuracy in reflecting the characteristics of the related financial asset or liability and its significant risks. Inputs and assumptions, including any price-valuation adjustments, are developed by the business units and independently reviewed by the valuation group. Model valuations are compared to available market information including appropriate proxy instruments and other benchmarks to highlight abnormalities for further investigation.

Measuring fair value requires the exercise of management judgment. The level of subjectivity and the degree of management judgment required is more significant for financial instruments whose fair value is measured using inputs that are not observable. The areas requiring significant judgment are identified, documented and reported to the Valuation Committee as part of the valuation control framework. We believe that our valuation methods are appropriate; however, the use of different methodologies or assumptions, particularly as they apply to level-3 financial assets and liabilities, could materially affect fair-value measurements as of the reporting date.

The following tables present information with respect to our financial assets and liabilities carried at fair value in our consolidated statement of condition on a recurring basis as of the dates indicated. No transfers of financial assets or liabilities between levels 1 and 2 occurred during the six months ended June 30, 2013 or the year ended December 31, 2012.



	Fair-Value Measurements on a Recurring Basis
	as of June 30, 2013
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	20								$	20
Non-U.S. government securities	370									370
Other	58		$	205						263
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations	3		774							777
Mortgage-backed securities	—		25,598		$	864				26,462
Asset-backed securities:
Student loans	—		14,760		380					15,140
Credit cards	—		9,110		24					9,134
Sub-prime	—		1,325		—					1,325
Other	—		546		3,848					4,394
Total asset-backed securities	—		25,741		4,252					29,993
Non-U.S. debt securities:
Mortgage-backed securities	—		10,063		328					10,391
Asset-backed securities	—		4,711		756					5,467
Government securities	—		3,430		—					3,430
Other	—		4,027		281					4,308
Total non-U.S. debt securities	—		22,231		1,365					23,596
State and political subdivisions	—		8,074		45					8,119
Collateralized mortgage obligations	—		4,738		238					4,976
Other U.S. debt securities	—		5,056		9					5,065
U.S. equity securities	—		43		—					43
Non-U.S. equity securities	—		1		—					1
Money-market mutual funds	—		1,148		—					1,148
Total investment securities available for sale	3		93,404		6,773					100,180
Other assets:
Derivative instruments:
Foreign exchange contracts	—		11,438		121
Interest-rate contracts	—		71		—
Total derivative instruments	—		11,509		121		$	(5,495	)	6,135
Other	95		—		—		—			95
Total assets carried at fair value	$	546	$	105,118	$	6,894	$	(5,495	)	$	107,063
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts			$	11,085	$	108
Interest-rate contracts			332		—
Other			—		9
Total derivative instruments			11,417		117		$	(5,538	)	5,996
Other	$	95	—		—		—			95
Total liabilities carried at fair value	$	95	$	11,417	$	117	$	(5,538	)	$	6,091

⁽¹⁾Represents counterparty netting against level-2 financial assets and liabilities, where a legally enforceable master netting agreement exists between State Street and the counterparty. Netting also reflects asset and liability reductions of $861 million and $904 million, respectively, for cash collateral received from and provided to derivative counterparties. Netting cannot be disaggregated by type of derivative instrument because netting is managed at the counterparty level, not the instrument level.



	Fair-Value Measurements on a Recurring Basis
	as of December 31, 2012
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	20								$	20
Non-U.S. government securities	391									391
Other	71		$	155						226
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations	3		838							841
Mortgage-backed securities	—		31,387		$	825				32,212
Asset-backed securities:
Student loans	—		15,833		588					16,421
Credit cards	—		9,919		67					9,986
Sub-prime	—		1,399		—					1,399
Other	—		683		3,994					4,677
Total asset-backed securities	—		27,834		4,649					32,483
Non-U.S. debt securities:
Mortgage-backed securities	—		10,850		555					11,405
Asset-backed securities	—		5,694		524					6,218
Government securities	—		3,199		—					3,199
Other	—		4,166		140					4,306
Total non-U.S. debt securities	—		23,909		1,219					25,128
State and political subdivisions	—		7,503		48					7,551
Collateralized mortgage obligations	—		4,837		117					4,954
Other U.S. debt securities	—		5,289		9					5,298
U.S. equity securities	—		31		—					31
Non-U.S. equity securities	—		1		—					1
Money-market mutual funds	—		1,183		—					1,183
Total investment securities available for sale	3		102,812		6,867					109,682
Other assets:
Derivatives instruments:
Foreign exchange contracts	—		9,265		113
Interest-rate contracts	—		223		—
Total derivative instruments	—		9,488		113		$	(5,045	)	4,556
Other	66		2		—		—			68
Total assets carried at fair value	$	551	$	112,457	$	6,980	$	(5,045	)	$	114,943
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts			$	8,978	$	106
Interest-rate contracts			345		—
Other			—		9
Total derivative instruments			9,323		115		$	(4,071	)	5,367
Other	$	66	—		—		—			66
Total liabilities carried at fair value	$	66	$	9,323	$	115	$	(4,071	)	$	5,433

⁽¹⁾Represents counterparty netting against level-2 financial assets and liabilities, where a legally enforceable master netting agreement exists between State Street and the counterparty. Netting also reflects asset and liability reductions of $1.45 billion and $478 million, respectively, for cash collateral received from and provided to derivative counterparties. Netting cannot be disaggregated by type of derivative instrument because netting is managed at the counterparty level, not the instrument level.

The following tables present activity related to our level-3 financial assets and liabilities during the three and six months ended June 30, 2013 and 2012, respectively. Transfers into and out of level 3 are reported as of the beginning of the period. In both the three and six months ended June 30, 2013 and 2012, transfers out of level 3 were substantially related to certain asset-backed securities and non-U.S. debt securities, for which fair value was measured using prices for which observable market information became available.



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended June 30, 2013
	Fair Value as of March 31, 2013		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)					Purchases		Issuances	Sales	Settlements			Fair Value as of June 30, 2013		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2013
(In millions)								Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	798											$	92			$	(26	)	$	864
Asset-backed securities:
Student loans	461				$	(76	)	$	1	$	2		—				(8		)	380
Credit cards	24				—			—		—			—				—			24
Other	3,872				—			15		9			385				(433		)	3,848
Total asset-backed securities	4,357				(76		)	16		11			385				(441		)	4,252
Non-U.S. debt securities:
Mortgage-backed securities	331				—			—		(1		)	—				(2		)	328
Asset-backed securities	470		$	139	—			1		(2		)	183				(35		)	756
Other	276		—		—			—		1			—				4			281
Total non-U.S. debt securities	1,077		139		—			1		(2		)	183				(33		)	1,365
State and political subdivisions	47		—		—			—		(1		)	—				(1		)	45
Collateralized mortgage obligations	108		—		—			—		—			140				(10		)	238
Other U.S. debt securities	9		—		—			—		—			—				—			9
Total investment securities available for sale	6,396		139		(76		)	17		8			800				(511		)	6,773
Other assets:
Derivative instruments, Foreign exchange contracts	172		—		—			31		—			12				(94		)	121		$	34
Total assets carried at fair value	$	6,568	$	139	$	(76	)	$	48	$	8		$	812	—	—	$	(605	)	$	6,894	$	34



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended June 30, 2013
	Fair Value as of March 31, 2013		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses			Purchases	Issuances		Sales	Settlements			Fair Value as of June 30, 2013		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of June 30, 2013
(In millions)					Recorded in Revenue		Recorded in Other Comprehensive Income
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	153			$	24			$	10		$	(79	)	$	108	$	29
Other	9				—				—			—			9		—
Total derivative instruments	162				24				10			(79		)	117		29
Other	—				—				—			—			—		—
Total liabilities carried at fair value	$	162	—	—	$	24	—	—	$	10	—	$	(79	)	$	117	$	29



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2013
	Fair Value as of December 31, 2012		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)					Purchases		Issuances	Sales			Settlements			Fair Value as of June 30, 2013		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2013
(In millions)								Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	825								$	1		$	92					$	(54	)	$	864
Asset-backed securities:
Student loans	588				$	(175	)	$	1	8			—			$	(26	)	(16		)	380
Credit cards	67				—			—		—			—			—			(43		)	24
Other	3,994				—			28		30			565			(10		)	(759		)	3,848
Total asset-backed securities	4,649				(175		)	29		38			565			(36		)	(818		)	4,252
Non-U.S. debt securities:
Mortgage-backed securities	555				(208		)	—		—			—			—			(19		)	328
Asset-backed securities	524		$	139	(77		)	3		1			234			—			(68		)	756
Other	140		—		(40		)	—		1			179			—			1			281
Total non-U.S. debt securities	1,219		139		(325		)	3		2			413			—			(86		)	1,365
State and political subdivisions	48		—		—			—		(1		)	—			—			(2		)	45
Collateralized mortgage obligations	117		—		—			—		—			140			—			(19		)	238
Other U.S. debt securities	9		—		—			—		—			—			—			—			9
Total investment securities available for sale	6,867		139		(500		)	32		40			1,210			(36		)	(979		)	6,773
Other assets:
Derivative instruments, Foreign exchange contracts	113		—		—			134		—			32			—			(158		)	121		$	56
Total assets carried at fair value	$	6,980	$	139	$	(500	)	$	166	$	40		$	1,242	—	$	(36	)	$	(1,137	)	$	6,894	$	56



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2013
	Fair Value as of December 31, 2012		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses			Purchases	Issuances		Sales	Settlements			Fair Value as of June 30, 2013		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of June 30, 2013
(In millions)					Recorded in Revenue		Recorded in Other Comprehensive Income
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	106			$	74			$	35		$	(107	)	$	108	$	42
Other	9				—				—			—			9		—
Total derivative instruments	115				74				35			(107		)	117		42
Total liabilities carried at fair value	$	115	—	—	$	74	—	—	$	35	—	$	(107	)	$	117	$	42



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended June 30, 2012
	Fair Value as of March 31, 2012		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales	Settlements			Fair Value as of June 30, 2012		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2012
(In millions)								Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations
Mortgage-backed securities	$	912	$	50														$	(29	)	$	933
Asset-backed securities:
Student loans	511		—					$	1		$	(8	)					(20		)	484
Credit cards	119		—					2			(4		)	$	157			—			274
Other	3,090		—					11			9			213				(229		)	3,094
Total asset-backed securities	3,720		—		—			14			(3		)	370				(249		)	3,852
Non-U.S. debt securities:
Mortgage-backed securities	469				$	(338	)				3			147				(8		)	273
Asset-backed securities	1,035				(483		)				1			840				(31		)	1,362
Other	314				(308		)				(4		)	—				(1		)	1
Total non-U.S. debt securities	1,818		—		(1,129		)	—			—			987				(40		)	1,636
State and political subdivisions	50		—		—			—			—			—				(1		)	49
Collateralized mortgage obligations	193		45		(59		)	66			—			177				(121		)	301
Total investment securities available for sale	6,693		95		(1,188		)	80			(3		)	1,534				(440		)	6,771
Other assets:
Derivative instruments, Foreign exchange contracts	127		—		—			(77		)	—			157				(47		)	160		$	(52	)
Total assets carried at fair value	$	6,820	$	95	$	(1,188	)	$	3		$	(3	)	$	1,691	—	—	$	(487	)	$	6,931	$	(52	)



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended June 30, 2012
	Fair Value as of March 31, 2012		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses				Purchases	Issuances		Sales	Settlements			Fair Value as of June 30, 2012		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of June 30, 2012
(In millions)					Recorded in Revenue			Recorded in Other Comprehensive Income
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	126			$	(78	)			$	150		$	(41	)	$	157	$	(52	)
Other	9				—								—			9		—
Total derivative instruments	135				(78		)			150			(41		)	166		(52		)
Other	20				—					—			(20		)	—		—
Total liabilities carried at fair value	$	155	—	—	$	(78	)	—	—	$	150	—	$	(61	)	$	166	$	(52	)



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2012
	Fair Value as of December 31, 2011		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales			Settlements			Fair Value as of June 30, 2012		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2012
(In millions)								Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies:
Mortgage-backed securities	$	1,189	$	50	$	(251	)													$	(55	)	$	933
Asset-backed securities:
Student loans	860		—		(341		)	$	1		$	(10	)							(26		)	484
Credit cards	91		21		—			3			(3		)	$	224		$	(62	)	—			274
Other	2,798		—		—			21			25			569			(12		)	(307		)	3,094
Total asset-backed securities	3,749		21		(341		)	25			12			793			(74		)	(333		)	3,852
Non-U.S. debt securities:
Mortgage-backed securities	1,457		—		(1,495		)	—			4			306			—			1			273
Asset-backed securities	1,768		—		(1,568		)	—			—			1,207			—			(45		)	1,362
Other	71		—		(372		)	—			(4		)	308			—			(2		)	1
Total non-U.S. debt securities	3,296		—		(3,435		)	—			—			1,821			—			(46		)	1,636
State and political subdivisions	50		—		—			—			—			—						(1		)	49
Collateralized mortgage obligations	227		45		(191		)	201			—			282			—			(263		)	301
Other U.S. debt securities	2		—		—			—			—			—			—			(2		)	—
Total investment securities available for sale	8,513		116		(4,218		)	226			12			2,896			(74		)	(700		)	6,771
Other assets:
Derivative instruments:
Foreign exchange contracts	168		—		—			(108		)	—			198			—			(98		)	160		$	(73	)
Interest-rate contracts	10		—		—			(10		)	—			—			1			(1		)	—		—
Total derivative instruments	178		—		—			(118		)	—			198			1			(99		)	160		(73		)
Total assets carried at fair value	$	8,691	$	116	$	(4,218	)	$	108		$	12		$	3,094	—	$	(73	)	$	(799	)	$	6,931	$	(73	)



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2012
	Fair Value as of December 31, 2011		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses				Purchases	Issuances		Sales	Settlements			Fair Value as of June 30, 2012		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of June 30, 2012
(In millions)	Fair Value as of December 31, 2011		Transfers into Level 3	Transfers out of Level 3	Recorded in Revenue			Recorded in Other Comprehensive Income	Purchases	Issuances		Sales	Settlements			Fair Value as of June 30, 2012
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	161			$	(115	)			$	195		$	(84	)	$	157	$	(68	)
Interest-rate contracts	11				(10		)			—			(1		)	—		—
Other	9				—					—			—			9		—
Total derivative instruments	181				(125		)			195			(85		)	166		(68		)
Other	20				—					—			(20		)	—
Total liabilities carried at fair value	$	201	—	—	$	(125	)	—	—	$	195	—	$	(105	)	$	166	$	(68	)

The following table presents total realized and unrealized gains and losses, for the periods indicated, that were recorded in revenue for our level-3 financial assets and liabilities:



	Three Months Ended June 30,							Six Months Ended June 30,
	Total Realized and Unrealized Gains (Losses) Recorded in Revenue				Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30,			Total Realized and Unrealized Gains (Losses) Recorded in Revenue				Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30,
(In millions)	2013		2012		2013		2012	2013		2012		2013		2012
Fee revenue:
Trading services	$	7	$	1	$	5		$	60	$	7	$	14	$	(5	)
Total fee revenue	7		1		5			60		7		14		(5		)
Net interest revenue	17		80		—			32		226		—		—
Total revenue	$	24	$	81	$	5	—	$	92	$	233	$	14	$	(5	)

The following table presents quantitative information, as of the dates indicated, about the valuation techniques and significant unobservable inputs used in the valuation of our level-3 financial assets and liabilities measured at fair value on a recurring basis for which we use internally-developed pricing models. The significant unobservable inputs for our level-3 financial assets and liabilities whose fair value is measured using pricing information from non-binding broker or dealer quotes are not included in the table, as the specific inputs applied are not provided by the broker/dealer.



	Quantitative Information about Level-3 Fair-Value Measurements
	Fair Value						Weighted-Average
(Dollars in millions)	As of June 30, 2013		As of December 31, 2012		Valuation Technique	Significant Unobservable Input	As of June 30, 2013		As of December 31, 2012
Significant unobservable inputs readily available to State Street:
Assets:
Asset-backed securities, student loans	$	14	$	12	Discounted cash flows	Credit spread	3.8	%	6.7	%
Asset-backed securities, credit cards	24		67		Discounted cash flows	Credit spread	2.1		7.1
Asset-backed securities, other	105		103		Discounted cash flows	Credit spread	1.0		1.5
State and political subdivisions	45		48		Discounted cash flows	Credit spread	2.0		1.9
Derivative instruments, foreign exchange contracts	121		113		Option model	Volatility	14.8		9.8
Total	$	309	$	343

Liabilities:
Derivative instruments, foreign exchange contracts	$	108	$	106	Option model	Volatility	14.9		9.8
Derivative instruments, other	9		9		Discounted cash flows	Participant redemptions	6.4		6.7
Total	$	117	$	115

The following tables present information with respect to the composition of our level-3 financial assets and liabilities, by availability of significant unobservable inputs, as of the dates indicated:



June 30, 2013	Significant Unobservable Inputs Readily Available to State Street⁽¹⁾		Significant Unobservable Inputs Not Developed by State Street and Not Readily Available⁽²⁾		Total Assets and Liabilities with Significant Unobservable Inputs
(In millions)
Assets:
U.S. Treasury and federal agencies, mortgage-backed securities	$	—	$	864	$	864
Asset-backed securities, student loans	14		366		380
Asset-backed securities, credit cards	24		—		24
Asset-backed securities, other	105		3,743		3,848
Non-U.S. debt securities, mortgage-backed securities	—		328		328
Non-U.S. debt securities, asset-backed securities	—		756		756
Non-U.S. debt securities, other			281		281
State and political subdivisions	45		—		45
Collateralized mortgage obligations	—		238		238
Other U.S.debt securities	—		9		9
Derivative instruments, foreign exchange contracts	121		—		121
Total	$	309	$	6,585	$	6,894

Liabilities:
Derivative instruments, foreign exchange contracts	$	108	—		$	108
Derivative instruments, other	9		—		9
Total	$	117	—		$	117



December 31, 2012	Significant Unobservable Inputs Readily Available to State Street⁽¹⁾		Significant Unobservable Inputs Not Developed by State Street and Not Readily Available⁽²⁾		Total Assets and Liabilities with Significant Unobservable Inputs
(In millions)
Assets:
U.S. Treasury and federal agencies, mortgage-backed securities	$	—	$	825	$	825
Asset-backed securities, student loans	12		576		588
Asset-backed securities, credit cards	67		—		67
Asset-backed securities, other	103		3,891		3,994
Non-U.S. debt securities, mortgage-backed securities	—		555		555
Non-U.S. debt securities, asset-backed securities	—		524		524
Non-U.S. debt securities, other	—		140		140
State and political subdivisions	48		—		48
Collateralized mortgage obligations	—		117		117
Other U.S.debt securities	—		9		9
Derivative instruments, foreign exchange contracts	113		—		113
Total	$	343	$	6,637	$	6,980

Liabilities:
Derivative instruments, foreign exchange contracts	$	106	—		$	106
Derivative instruments, other	9		—		9
Total	$	115	—		$	115

⁽¹⁾Information with respect to these model-priced financial assets and liabilities is provided in the preceding table.

⁽²⁾Fair value for these financial assets is measured using non-binding broker or dealer quotes.

Internally-developed pricing models used to measure the fair value of our level-3 financial assets and liabilities incorporate discounted cash-flow and option-modeling techniques. Use of these techniques requires the determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on fair value.

Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input, resulting in a potentially muted impact on the overall fair value of that particular instrument. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain inputs are interrelated to one another), which may counteract or magnify the fair-value impact.

For recurring level-3 fair-value measurements for which significant unobservable inputs are readily available to State Street as of June 30, 2013, the sensitivity of the fair-value measurement to changes in significant unobservable inputs, and a description of any interrelationships between those unobservable inputs, is described below; however, we rarely experience a situation in which those unobservable inputs change in isolation:


•	The significant unobservable input used in the measurement of the fair value of our asset-backed securities and investment securities issued by state and political subdivisions is the credit spread. Significant increases (decreases) in the credit spread would result in measurements of significantly lower (higher) fair value.

•

The significant unobservable inputs used in the measurement of the fair value of our other non-U.S. debt securities, specifically securities collateralized by sovereign-trade credit obligations, are discount rates, expected recovery and expected maturity. Significant increases (decreases) in the discount rate and the expected maturity in isolation would result in measurements of significantly lower (higher) fair value. A significant increase (decrease) in the expected recovery would result in measurements of significantly higher (lower) fair value. However, a change in the discount rate plays a much more significant role in the measurement of fair value.


•	The significant unobservable input used in the measurement of the fair value of our foreign exchange option contracts is the implied volatility surface. A significant increase (decrease) in the implied volatility surface would result in measurements of significantly higher (lower) fair value.

•

The significant unobservable input used in the measurement of the fair value of our other derivative instruments, specifically stable value wrap contracts, is participant redemptions. Increased volatility of redemptions may result in changes to the measurement of fair value. Generally, significant increases (decreases) in participant redemptions may result in measurements of significantly higher (lower) fair value of this liability.

Fair Values of Financial Instruments:

Estimates of fair value for financial instruments not carried at fair value on a recurring basis in our consolidated statement of condition, as defined by GAAP, are generally subjective in nature, and are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Disclosure of fair-value estimates is not required by GAAP for certain items, such as lease financing, equity-method investments, obligations for pension and other post-retirement plans, premises and equipment, other intangible assets and income-tax assets and liabilities. Accordingly, aggregate fair-value estimates presented do not purport to represent, and should not be considered representative of, our underlying “market” or franchise value. In addition, because of potential differences in methodologies and assumptions used to estimate fair values, our estimates of fair value should not be compared to those of other financial institutions.

We use the following methods to estimate the fair values of our financial instruments:


•	For financial instruments that have quoted market prices, those quoted prices are used to estimate fair value.


•	For financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, we assume that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk.


•	For financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

The generally short duration of certain of our assets and liabilities results in a significant number of financial instruments for which fair value equals or closely approximates the amount reported in our consolidated statement of condition. These financial instruments are reported in the following captions in our consolidated statement of condition: cash and due from banks; interest-bearing deposits with banks; securities purchased under resale agreements; accrued income receivable; deposits; securities sold under repurchase agreements; federal funds purchased; and other short-term borrowings. In addition, due to the relatively short duration of certain of our net loans (excluding leases), we consider fair value for these loans to approximate their reported value. The fair value of other types of loans, such as purchased receivables and commercial real estate loans, is estimated by discounting expected future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. Loan commitments have no reported value because their terms are at prevailing market rates.

The following tables present the reported amounts and estimated fair values of the financial instruments defined by GAAP, excluding financial assets and liabilities carried at fair value on a recurring basis, as they would be categorized within the fair-value hierarchy as of the dates indicated.



					Fair-Value Hierarchy
June 30, 2013	Reported Amount		Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
(In millions)
Financial Assets:
Cash and due from banks	$	5,479	$	5,479	$	5,479	$	—	$	—
Interest-bearing deposits with banks	44,783		44,783		—		44,783		—
Securities purchased under resale agreements	5,569		5,569		—		5,569		—
Investment securities held to maturity	15,468		15,382		—		15,382		—
Loans (excluding leases)	15,298		15,291		—		14,791		500
Financial Liabilities:
Deposits:
Noninterest-bearing	$	49,922	$	49,922	$	—	$	49,922	$	—
Interest-bearing - U.S.	7,684		7,684		—		7,684		—
Interest-bearing - non-U.S.	108,914		108,914		—		108,914		—
Securities sold under repurchase agreements	9,154		9,154		—		9,154		—
Federal funds purchased	98		98		—		98		—
Other short-term borrowings	3,277		3,277		—		3,277		—
Long-term debt	8,841		9,145		—		8,195		950



					Fair-Value Hierarchy
December 31, 2012	Reported Amount		Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
(In millions)
Financial Assets:
Cash and due from banks	$	2,590	$	2,590	$	2,590	$	—	$	—
Interest-bearing deposits with banks	50,763		50,763		—		50,763		—
Securities purchased under resale agreements	5,016		5,016		—		5,016		—
Investment securities held to maturity	11,379		11,661		—		11,661		—
Loans (excluding leases)	11,121		11,166		—		10,276		890
Financial Liabilities:
Deposits:
Noninterest-bearing	$	44,445	$	44,445	$	—	$	44,445	$	—
Interest-bearing - U.S.	19,201		19,201		—		19,201		—
Interest-bearing - non-U.S.	100,535		100,535		—		100,535		—
Securities sold under repurchase agreements	8,006		8,006		—		8,006		—
Federal funds purchased	399		399		—		399		—
Other short-term borrowings	4,502		4,502		—		4,502		—
Long-term debt	7,429		7,780		—		6,871		909