The tables below present the gross fair value and the notional amounts of derivative contracts by major product type, the amounts of counterparty and cash collateral netting in the consolidated balance sheets, as well as cash and s

curities collateral posted and received under enforceable credit support agreements that do not meet the criteria for netting under U.S. GAAP.



	As of September 2021					As of December 2020

$ in millions		Derivative Assets		Derivative Liabilities			Derivative Assets		Derivative Liabilities
Not accounted for as hedges

Exchange-traded		$ 295		$ 460			$ 665		$ 660
OTC-cleared		14,960		13,847			18,832		16,809
Bilateral OTC		239,708		213,612			337,998		304,370
Total interest rates		254,963		227,919			357,495		321,839
OTC-cleared		4,789		5,200			4,137		4,517
Bilateral OTC		12,287		11,180			12,418		11,551
Total credit		17,076		16,380			16,555		16,068
Exchange-traded		208		18			133		22
OTC-cleared		446		325			401		631
Bilateral OTC		77,690		74,705			101,830		102,676
Total currencies		78,344		75,048			102,364		103,329
Exchange-traded		10,803		11,538			4,476		4,177
OTC-cleared		489		456			195		187
Bilateral OTC		36,707		30,745			9,320		13,691
Total commodities		47,999		42,739			13,991		18,055
Exchange-traded		42,055		41,626			29,006		31,944
OTC-cleared		8		7			–		–
Bilateral OTC		41,624		49,790			47,867		49,072
Total equities		83,687		91,423			76,873		81,016
Subtotal		482,069		453,509			567,278		540,307
Accounted for as hedges
OTC-cleared		5		–			1		–
Bilateral OTC		1,000		–			1,346		–
Total interest rates		1,005		–			1,347		–
OTC-cleared		66		17			–		87
Bilateral OTC		195		122			4		372
Total currencies		261		139			4		459
Subtotal		1,266		139			1,351		459
Total gross fair value		$ 483,335		$ 453,648			$ 568,629		$ 540,766
Offset in the consolidated balance sheets
Exchange-traded		$ (46,978	)	$ (46,978	)		$ (29,549	)	$ (29,549	)
OTC-cleared		(19,180	)	(19,180	)		(21,315	)	(21,315	)
Bilateral OTC		(281,429	)	(281,429	)		(372,142	)	(372,142	)
Counterparty netting		(347,587	)	(347,587	)		(423,006	)	(423,006	)
OTC-cleared		(1,151	)	(430	)		(1,926	)	(720	)
Bilateral OTC		(63,014	)	(52,125	)		(74,116	)	(58,449	)
Cash collateral netting		(64,165	)	(52,555	)		(76,042	)	(59,169	)
Total amounts offset		$(411,752	)	$(400,142	)		$(499,048	)	$(482,175	)
Included in the consolidated balance sheets
Exchange-traded		$ 6,383		$ 6,664			$ 4,731		$ 7,254
OTC-cleared		432		242			325		196
Bilateral OTC		64,768		46,600			64,525		51,141
Total		$ 71,583		$ 53,506			$ 69,581		$ 58,591
Not offset in the consolidated balance sheets
Cash collateral		$ (1,092	)	$ (1,857	)		$ (979	)	$ (2,427	)
Securities collateral		(15,932	)	(7,606	)		(17,297	)	(9,943	)
Total		$ 54,559		$ 44,043			$ 51,305		$ 46,221



	Notional Amounts as of

$ in millions		September 2021	December 2020
Not accounted for as hedges
Exchange-traded		$ 2,802,116	$ 3,722,558
OTC-cleared		16,154,313	13,789,571
Bilateral OTC		11,610,308	11,076,460
Total interest rates		30,566,737	28,588,589
Exchange-traded		44	–
OTC-cleared		580,846	515,197
Bilateral OTC		595,708	558,813
Total credit		1,176,598	1,074,010
Exchange-traded		17,031	7,413
OTC-cleared		195,425	157,687
Bilateral OTC		6,667,786	6,041,663
Total currencies		6,880,242	6,206,763
Exchange-traded		354,299	242,193
OTC-cleared		2,596	2,315
Bilateral OTC		242,751	206,253
Total commodities		599,646	450,761
Exchange-traded		1,291,539	948,937
OTC-cleared		258	–
Bilateral OTC		1,318,136	1,126,572
Total equities		2,609,933	2,075,509
Subtotal		41,833,156	38,395,632
Accounted for as hedges
OTC-cleared		208,439	182,311
Bilateral OTC		5,021	6,641
Total interest rates		213,460	188,952
OTC-cleared		3,178	1,767
Bilateral OTC		19,514	14,055
Total currencies		22,692	15,822
Exchange-traded		986	–
Total commodities		986	–
Subtotal		237,138	204,774
Total notional amounts		$42,070,294	$38,600,406

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 $18.23 billion as of September 2021 and $20.60 billion as of December 2020, and derivative liabilities of $18.45 billion as of September 2021 and $22.98 billion as of December 2020, 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 2021
Assets
Interest rates	$ 96		$ 254,940		$ 932		$ 255,968
Credit	–		13,868		3,208		17,076
Currencies	–		78,350		255		78,605
Commodities	–		46,708		1,291		47,999
Equities	90		82,363		1,234		83,687
Gross fair value	186		476,229		6,920		483,335
Counterparty netting in levels	–		(344,083	)	(877	)	(344,960	)
Subtotal	$ 186		$ 132,146		$ 6,043		$ 138,375
Cross-level counterparty netting							(2,627	)
Cash collateral netting							(64,165	)
Net fair value							$ 71,583
Liabilities
Interest rates	$ (3	)	$(227,231	)	$ (685	)	$(227,919	)
Credit	–		(14,891	)	(1,489	)	(16,380	)
Currencies	–		(74,813	)	(374	)	(75,187	)
Commodities	–		(41,961	)	(778	)	(42,739	)
Equities	(82	)	(88,396	)	(2,945	)	(91,423	)
Gross fair value	(85	)	(447,292	)	(6,271	)	(453,648	)
Counterparty netting in levels	–		344,083		877		344,960
Subtotal	$ (85	)	$(103,209	)	$(5,394	)	$(108,688	)
Cross-level counterparty netting							2,627
Cash collateral netting							52,555
Net fair value							$ (53,506	)
As of December 2020
Assets
Interest rates	$ 297		$ 357,568		$ 977		$ 358,842
Credit	–		13,104		3,451		16,555
Currencies	–		102,221		147		102,368
Commodities	–		13,285		706		13,991
Equities	75		75,054		1,744		76,873
Gross fair value	372		561,232		7,025		568,629
Counterparty netting in levels	(135	)	(420,685	)	(1,058	)	(421,878	)
Subtotal	$ 237		$ 140,547		$ 5,967		$ 146,751
Cross-level counterparty netting							(1,128	)
Cash collateral netting							(76,042	)
Net fair value							$ 69,581
Liabilities
Interest rates	$(229	)	$ (320,900	)	$ (710	)	$ (321,839	)
Credit	–		(14,395	)	(1,673	)	(16,068	)
Currencies	–		(103,303	)	(485	)	(103,788	)
Commodities	–		(17,649	)	(406	)	(18,055	)
Equities	(318	)	(78,122	)	(2,576	)	(81,016	)
Gross fair value	(547	)	(534,369	)	(5,850	)	(540,766	)
Counterparty netting in levels	135		420,685		1,058		421,878
Subtotal	$(412	)	$ (113,684	)	$ (4,792	)	$ (118,888	)
Cross-level counterparty netting							1,128
Cash collateral netting							59,169
Net fair value							$ (58,591	)

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 2021

As of December 2020

$ in millions, except inputs

Amount or

Range

Average/

Median

Amount or

Range

Average/

Median

Interest rates, net

$247

$267

Correlation

25% to 81%

63%/62%

(8)% to 81%

56%/60%

Volatility (bps)

31 to 150

65/54

31 to 150

65/53

Credit, net

$1,719

$1,778

Credit spreads (bps)

1 to 576

113/87

2 to 699

109/74

Upfront credit points

2 to 100

40/30

7 to 90

40/30

Recovery rates

20% to 90%

47%/40%

25% to 90%

46%/40%

Currencies, net

$(119)

$(338)

Correlation

20% to 70%

39%/41%

20% to 70%

39%/41%

Volatility

20% to 20%

20%/20%

18% to 18%

18%/18%

Commodities, net

$513

$300

Volatility

15% to 152%

37%/33%

15% to 87%

32%/30%

Natural gas spread

$(1.39) to

$4.36

$(0.07)/

$(0.03)

$(1.00) to

$2.13

$(0.13)/

$(0.09)

Oil spread

$(0.93) to

$(0.74)

$(0.84)/

$(0.84)

$8.30 to

$11.20

$9.73/

$9.55

Electricity price

$9.95 to

$55.76

$34.19/

$35.69

N/A

Equities, net

$(1,711)

$(832)

Correlation

(70)% to 99%

62%/71%

(70)% to 100%

52%/55%

Volatility

4% to 153%

18%/19%

3% to 129%

14%/7%

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		2021		2020			2021		2020
Total level 3 derivatives, net
Beginning balance		$ 567		$3,060			$ 1,175		$ 25
Net realized gains/(losses)		(33	)	(8	)		73		142
Net unrealized gains/(losses)		453		(315	)		34		1,465
Purchases		92		93			439		345
Sales		(366	)	(288	)		(1,058	)	181
Settlements		(264	)	(189	)		99		182
Transfers into level 3		(112	)	–			(79	)	(74	)
Transfers out of level 3		312		(199	)		(34	)	(112	)
Ending balance		$ 649		$2,154			$ 649		$2,154

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		2021		2020			2021		2020
Interest rates, net
Beginning balance		$ 308		$ 311			$ 267		$ 89
Net realized gains/(losses)		(60	)	3			(11	)	12
Net unrealized gains/(losses)		(56	)	54			38		201
Purchases		–		11			67		18
Sales		(24	)	1			(72	)	(15	)
Settlements		101		(59	)		23		(40	)
Transfers into level 3		(20	)	(53	)		(1	)	(14	)
Transfers out of level 3		(2	)	(13	)		(64	)	4
Ending balance		$ 247		$ 255			$ 247		$ 255
Credit, net
Beginning balance		$ 1,750		$2,327			$ 1,778		$ 1,877
Net realized gains/(losses)		(22	)	(1	)		(33	)	6
Net unrealized gains/(losses)		11		(124	)		129		175
Purchases		18		16			62		35
Sales		(35	)	(8	)		(62	)	(23	)
Settlements		(22	)	(189	)		(9	)	(38	)
Transfers into level 3		15		26			(60	)	4
Transfers out of level 3		4		(61	)		(86	)	(50	)
Ending balance		$ 1,719		$1,986			$ 1,719		$ 1,986
Currencies, net
Beginning balance		$ (234	)	$ (94	)		$ (338	)	$ (211	)
Net realized gains/(losses)		9		18			(29	)	8
Net unrealized gains/(losses)		43		(143	)		(7	)	(118	)
Purchases		1		5			41		5
Sales		(5	)	(12	)		(12	)	(7	)
Settlements		36		(34	)		235		77
Transfers into level 3		(4	)	(1	)		(20	)	(2	)
Transfers out of level 3		35		6			11		(7	)
Ending balance		$ (119	)	$ (255	)		$ (119	)	$ (255	)
Commodities, net
Beginning balance		$ 266		$ 331			$ 300		$ 247
Net realized gains/(losses)		(23	)	16			(76	)	65
Net unrealized gains/(losses)		196		(84	)		348		38
Purchases		16		1			38		2
Sales		(4	)	(7	)		(34	)	(20	)
Settlements		6		(20	)		(56	)	(64	)
Transfers into level 3		25		(12	)		16		(24	)
Transfers out of level 3		31		(30	)		(23	)	(49	)
Ending balance		$ 513		$ 195			$ 513		$ 195
Equities, net
Beginning balance		$(1,523	)	$ 185			$ (832	)	$(1,977	)
Net realized gains/(losses)		63		(44	)		222		51
Net unrealized gains/(losses)		259		(18	)		(474	)	1,169
Purchases		57		60			231		285
Sales		(298	)	(262	)		(878	)	246
Settlements		(385	)	113			(94	)	247
Transfers into level 3		(128	)	40			(14	)	(38	)
Transfers out of level 3		244		(101	)		128		(10	)
Ending balance		$(1,711	)	$ (27	)		$(1,711	)	$ (27	)

Level 3 Rollforward Commentary

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).

Three Months Ended September 2020.

The net realized and unrealized losses on level 3 derivatives of $323 million (reflecting $8 million of net realized losses and $315 million of net unrealized losses) for the three months ended September 2020 included losses of $289 million reported in market making and losses of $34 million reported in other principal transactions.

The net unrealized losses on level 3 derivatives for the three months ended September 2020 were primarily attributable to losses on certain currency derivatives (primarily reflecting the impact of changes in foreign exchange rates) and losses on certain credit derivatives (primarily reflecting the impact of tighter credit spreads).

The drivers of transfers into level 3 derivatives during the three months ended September 2020 were not material.

Transfers out of level 3 derivatives during the three months ended September 2020 primarily reflected transfers of certain equity derivative assets to level 2 (principally due to increased transparency of certain volatility inputs used to value these derivatives).

Nine Months Ended September 2020.

The net realized and unrealized gains on level 3 derivatives of $1.61 billion (reflecting $142 million of net realized gains and $1.47 billion of net unrealized gains) for the nine months ended September 2020 included gains of $1.67 billion reported in market making and losses of $61 million reported in other principal transactions.

The net unrealized gains on level 3 derivatives for the nine months ended September 2020 were primarily attributable to gains on certain equity derivatives (primarily reflecting the impact of changes in underlying equity prices) and gains on certain interest rate derivatives (primarily reflecting the impact of a decrease in interest rates).

The drivers of both transfers into level 3 derivatives and out of level 3 derivatives during the nine months ended September 2020 were not material.

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 2021
Assets
Interest rates	$ 6,226		$12,817		$60,548		$ 79,591
Credit	1,779		2,253		3,298		7,330
Currencies	13,252		6,038		6,822		26,112
Commodities	12,428		9,757		1,107		23,292
Equities	10,156		6,449		2,790		19,395
Counterparty netting in tenors	(2,824	)	(2,854	)	(2,789	)	(8,467	)
Subtotal	$41,017		$34,460		$71,776		$147,253
Cross-tenor counterparty netting							(17,888	)
Cash collateral netting							(64,165	)
Total OTC derivative assets							$ 65,200
Liabilities
Interest rates	$ 4,705		$10,129		$36,542		$ 51,376
Credit	1,758		2,573		2,303		6,634
Currencies	11,988		5,898		4,999		22,885
Commodities	7,996		6,465		2,835		17,296
Equities	10,555		13,658		3,348		27,561
Counterparty netting in tenors	(2,824	)	(2,854	)	(2,789	)	(8,467	)
Subtotal	$34,178		$35,869		$47,238		$117,285
Cross-tenor counterparty netting							(17,888	)
Cash collateral netting							(52,555	)
Total OTC derivative liabilities							$ 46,842
As of December 2020
Assets
Interest rates	$ 8,913		$20,145		$74,893		$103,951
Credit	822		3,270		3,302		7,394
Currencies	13,887		7,400		9,303		30,590
Commodities	2,998		1,466		488		4,952
Equities	12,182		12,590		1,807		26,579
Counterparty netting in tenors	(3,963	)	(4,458	)	(3,182	)	(11,603	)
Subtotal	$34,839		$40,413		$86,611		$161,863
Cross-tenor counterparty netting							(20,971	)
Cash collateral netting							(76,042	)
Total OTC derivative assets							$ 64,850
Liabilities
Interest rates	$ 5,687		$11,967		$49,301		$ 66,955
Credit	1,268		3,462		2,177		6,907
Currencies	18,770		7,575		5,775		32,120
Commodities	3,455		1,545		4,315		9,315
Equities	9,702		14,095		3,986		27,783
Counterparty netting in tenors	(3,963	)	(4,458	)	(3,182	)	(11,603	)
Subtotal	$34,919		$34,186		$62,372		$131,477
Cross-tenor counterparty netting							(20,971	)
Cash collateral netting							(59,169	)
Total OTC derivative liabilities							$ 51,337

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 2021, written credit derivatives had a total gross notional amount of $564.94 billion and purchased credit derivatives had a total gross notional amount of $612.88 billion, for total net notional purchased protection of $47.94 billion. As of December 2020, written credit derivatives had a total gross notional amount of $515.85 billion and purchased credit derivatives had a total gross notional amount of $558.18 billion, for total net notional purchased protection of $42.33 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 2021
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year		$105,584	$10,289		$ 807		$ 4,042		$120,722
1 – 5 years		332,858	24,819		4,838		3,563		366,078
Greater than 5 years		68,202	6,816		2,504		613		78,135
Total		$506,644	$41,924		$8,149		$ 8,218		$564,935
Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting		$440,512	$28,582		$6,350		$ 6,376		$481,820
Other		$108,898	$19,072		$2,218		$ 870		$131,058
Fair Value of Written Credit Derivatives
Asset		$ 10,165	$ 1,430		$ 295		$ 228		$ 12,118
Liability		894	991		597		1,608		4,090
Net asset/(liability)		$ 9,271	$ 439		$ (302	)	$(1,380	)	$ 8,028
As of December 2020
Maximum Payout/Notional Amount of Written Credit Derivatives by Tenor
Less than 1 year		$ 96,049	$ 5,826		$ 450		$ 2,403		$104,728
1 – 5 years		331,145	17,913		8,801		4,932		362,791
Greater than 5 years		44,132	3,839		272		88		48,331
Total		$471,326	$27,578		$9,523		$ 7,423		$515,850
Maximum Payout/Notional Amount of Purchased Credit Derivatives
Offsetting		$407,315	$19,822		$8,679		$ 7,091		$442,907
Other		$103,604	$ 7,272		$3,619		$776		$115,271
Fair Value of Written Credit Derivatives
Asset		$ 10,302	$ 638		$ 256		$ 118		$ 11,314
Liability		1,112	1,119		387		2,001		4,619
Net asset/(liability)		$ 9,190	$ (481	)	$ (131	)	$ (1,883	)	$ 6,695

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		2021	2020		2021		2020
CVA, net of hedges		$49	$103		$(14	)	$ 52
FVA, net of hedges		17	101		54		(78	)
Total		$66	$204		$ 40		$(26	)

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

$ in millions		September 2021		December 2020
Fair value of assets		$ 881		$ 1,450
Fair value of liabilities		(1,389	)	(1,220	)
Net asset/(liability)		$ (508	)	$ 230
Notional amount		$11,765		$12,548

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-

two-notch

downgrade in the firm’s credit ratings.



	As of

$ in millions		September 2021	December 2020
Net derivative liabilities under bilateral agreements		$36,431	$43,368
Collateral posted		$30,647	$35,296
Additional collateral or termination payments:
One-notch downgrade		$ 331	$ 481
Two-notch downgrade		$ 1,353	$ 1,388

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, (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. 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 fixed-rate obligations into floating-rate obligations.

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 expense. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value (hedging adjustment) and is also included in interest 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 to interest 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 borrowings and deposits, and total interest expense.



	Three Months Ended September					Nine Months Ended September

$ in millions		2021		2020			2021		2020
Interest rate hedges		$(1,528	)	$(1,111	)		$(5,459	)	$ 5,829
Hedged borrowings and deposits		$ 1,365		$ 916			$ 4,991		$(6,327	)
Interest expense		$ 1,553		$ 1,848			$ 4,435		$ 7,375

The table below presents the carrying value of deposits and unsecured borrowings that are designated in a 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 2021
Deposits	$ 15,266	$ 387
Unsecured short-term borrowings	$ 3,221	$ 10
Unsecured long-term borrowings	$136,905	$ 7,062
As of December 2020
Deposits	$ 17,303	$ 649
Unsecured short-term borrowings	$ 5,976	$ 53
Unsecured long-term borrowings	$115,242	$11,624

In the table above, cumulative hedging adjustment included $6.27 billion as of September 2021 and $6.34 billion as of December 2020 of hedging adjustments from prior hedging relationships that were

de-designated

and substantially all were related to unsecured long-term borrowings.

In addition,

cumulative hedging adjustments for items no longer designated in a hedging relationship were $147 million as of September 2021 and $489 million as of December 2020 and substantially all were 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 losses on the hedges (relating to both spot and forward points) and the foreign exchange gains on the related

available-for-sale

securities were included in market making and were not material for both the three and nine months ended September 2021 and September 2020.

During the second quarter of 2021, the firm designated commodity futures contracts as fair value hedges of the price risk of certain precious metals included in commodities within trading assets. As of September 2021, the carrying value of such commodities was $1.00 billion and the amortized cost was $1.04 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 September 2021 and the related gains/(losses) were not material for both the three and nine months ended 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		2021	2020			2021	2020
Hedges:
Foreign currency forward contract		$373	$(255	)		$600	$ 387
Foreign currency-denominated debt		$ 31	$(102	)		$290	$(132	)

Gains or losses on individual net investments in

non-U.S.

operations are reclassified to earnings from accumulated other comprehensive income/(loss) 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 both the three and nine months ended September 2021. 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 the three months ended September 2020, and were $61 million (reflecting a gain of $215 million related to hedges and a loss of $154 million on the related net investments in

non-U.S.

operations) for the nine months ended September 2020.

The firm had designated $3.68 billion as of September 2021 and $4.97 billion as of December 2020 of foreign currency-denominated debt, included in unsecured long- and short-term borrowings, as hedges of net investments in

non-U.S.

subsidiaries.