| Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities The Firm trades and makes markets globally in listed futures, OTC swaps, forwards, options and other derivatives referencing, among other things, interest rates, equities, currencies, investment grade and non-investment grade corporate credits, loans, bonds, U.S. and other sovereign securities, emerging market bonds and loans, credit indices, ABS indices, property indices, mortgage-related and other ABS, and real estate loan products. The Firm uses these instruments for market-making, managing foreign currency and credit exposure, and asset/liability management. The Firm manages its market-making positions by employing a variety of risk mitigation strategies. These strategies include diversification of risk exposures and hedging. Hedging activities consist of the purchase or sale of positions in related securities and financial instruments, including a variety of derivative products (e.g., futures, forwards, swaps and options). The Firm manages the market risk associated with its market-making activities on a Firmwide basis, on a worldwide trading division level and on an individual product basis. Fair Values of Derivative Contracts | | | | | | | | | | | | | | | | | Assets at December 31, 2025 | | $ in millions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 4 | | $ | — | | $ | — | | $ | 4 | | | Foreign exchange | 152 | | 82 | | — | | 234 | | | Total | 156 | | 82 | | — | | 238 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | 3 | | 32 | | — | | 35 | | | Other derivatives | | | | | | Interest rate | 114,368 | | 13,255 | | 58 | | 127,681 | | | Credit | 4,962 | | 5,347 | | — | | 10,309 | | | Foreign exchange | 81,613 | | 4,269 | | 29 | | 85,911 | | | Equity | 30,392 | | — | | 62,737 | | 93,129 | | | Commodity and other | 13,953 | | — | | 2,509 | | 16,462 | | | Total | 245,291 | | 22,903 | | 65,333 | | 333,527 | | | Total gross derivatives | $ | 245,447 | | $ | 22,985 | | $ | 65,333 | | $ | 333,765 | | | Amounts offset | | | | | | Counterparty netting | (174,466) | | (21,165) | | (62,796) | | (258,427) | | | Cash collateral netting | (37,004) | | (1,544) | | — | | (38,548) | | | Total in Trading assets | $ | 33,977 | | $ | 276 | | $ | 2,537 | | $ | 36,790 | | Amounts not offset1 | | | | | | Financial instruments collateral | (15,097) | | — | | — | | (15,097) | | | | | | | | Net amounts | $ | 18,880 | | $ | 276 | | $ | 2,537 | | $ | 21,693 | | Amounts for which master netting or collateral agreements are not in place or may not be legally enforceable, included in Net amounts | $ | 3,084 | |
| | | | | | | | | | | | | | | | | Liabilities at December 31, 2025 | | $ in millions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 532 | | $ | 29 | | $ | — | | $ | 561 | | | Foreign exchange | 111 | | 22 | | — | | 133 | | | Total | 643 | | 51 | | — | | 694 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | 45 | | 586 | | — | | 631 | | | Other derivatives | | | | | | Interest rate | 103,066 | | 12,162 | | 66 | | 115,294 | | | Credit | 5,292 | | 4,773 | | — | | 10,065 | | | Foreign exchange | 78,597 | | 4,271 | | 85 | | 82,953 | | | Equity | 60,908 | | — | | 62,425 | | 123,333 | | | Commodity and other | 12,578 | | — | | 2,598 | | 15,176 | | | Total | 260,486 | | 21,792 | | 65,174 | | 347,452 | | | Total gross derivatives | $ | 261,129 | | $ | 21,843 | | $ | 65,174 | | $ | 348,146 | | | Amounts offset | | | | | | Counterparty netting | (174,466) | | (21,165) | | (62,796) | | (258,427) | | | Cash collateral netting | (47,336) | | (358) | | — | | (47,694) | | | Total in Trading liabilities | $ | 39,327 | | $ | 320 | | $ | 2,378 | | $ | 42,025 | | Amounts not offset1 | | | | | | Financial instruments collateral | (7,181) | | (34) | | (743) | | (7,958) | | | | | | | | Net amounts | $ | 32,146 | | $ | 286 | | $ | 1,635 | | $ | 34,067 | | Amounts for which master netting or collateral agreements are not in place or may not be legally enforceable, included in Net amounts | $ | 5,345 | |
| | | | | | | | | | | | | | | | | Assets at December 31, 2024 | | $ in millions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 4 | | $ | — | | $ | — | | $ | 4 | | | Foreign exchange | 185 | | 122 | | — | | 307 | | | Total | 189 | | 122 | | — | | 311 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | — | | 28 | | — | | 28 | | | Other derivatives | | | | | | Interest rate | 115,520 | | 13,163 | | 119 | | 128,802 | | | Credit | 4,711 | | 4,411 | | — | | 9,122 | | | Foreign exchange | 104,024 | | 4,301 | | 90 | | 108,415 | | | Equity | 24,368 | | — | | 51,314 | | 75,682 | | | Commodity and other | 14,071 | | — | | 1,860 | | 15,931 | | | Total | 262,694 | | 21,903 | | 53,383 | | 337,980 | | | Total gross derivatives | $ | 262,883 | | $ | 22,025 | | $ | 53,383 | | $ | 338,291 | | | Amounts offset | | | | | | Counterparty netting | (188,069) | | (20,276) | | (51,168) | | (259,513) | | | Cash collateral netting | (38,511) | | (1,698) | | — | | (40,209) | | | Total in Trading assets | $ | 36,303 | | $ | 51 | | $ | 2,215 | | $ | 38,569 | | Amounts not offset1 | | | | | | Financial instruments collateral | (17,837) | | — | | — | | (17,837) | | | | | | | | Net amounts | $ | 18,466 | | $ | 51 | | $ | 2,215 | | $ | 20,732 | | Amounts for which master netting or collateral agreements are not in place or may not be legally enforceable, included in Net amounts | $ | 3,354 | |
| | | | | | | | | | | | | | | | | Liabilities at December 31, 2024 | | $ in millions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 533 | | $ | — | | $ | — | | $ | 533 | | | Foreign exchange | 3 | | — | | — | | 3 | | | Total | 536 | | — | | — | | 536 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | 53 | | 718 | | — | | 771 | | | Other derivatives | | | | | | Interest rate | 104,495 | | 13,038 | | 124 | | 117,657 | | | Credit | 4,941 | | 3,860 | | — | | 8,801 | | | Foreign exchange | 100,730 | | 4,085 | | 153 | | 104,968 | | | Equity | 42,332 | | — | | 53,142 | | 95,474 | | | Commodity and other | 11,584 | | — | | 1,979 | | 13,563 | | | Total | 264,135 | | 21,701 | | 55,398 | | 341,234 | | | Total gross derivatives | $ | 264,671 | | $ | 21,701 | | $ | 55,398 | | $ | 341,770 | | | Amounts offset | | | | | | Counterparty netting | (188,070) | | (20,276) | | (51,168) | | (259,514) | | | Cash collateral netting | (43,126) | | (1,200) | | — | | (44,326) | | | Total in Trading liabilities | $ | 33,475 | | $ | 225 | | $ | 4,230 | | $ | 37,930 | | Amounts not offset1 | | | | | | Financial instruments collateral | (6,338) | | — | | (2,658) | | (8,996) | | | | | | | | Net amounts | $ | 27,137 | | $ | 225 | | $ | 1,572 | | $ | 28,934 | | Amounts for which master netting or collateral agreements are not in place or may not be legally enforceable, included in Net amounts | $ | 4,321 | |
1.Amounts relate to master netting agreements and collateral agreements that have been determined by the Firm to be legally enforceable in the event of default but where certain other netting criteria are not met in accordance with applicable offsetting accounting guidance. See Note 4 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables. Notionals of Derivative Contracts | | | | | | | | | | | | | | | | | Assets at December 31, 2025 | | $ in billions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | — | | $ | 183 | | $ | — | | $ | 183 | | | Foreign exchange | 10 | | 4 | | — | | 14 | | | Total | 10 | | 187 | | — | | 197 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | — | | — | | — | | — | | | Other derivatives | | | | | | Interest rate | 4,779 | | 4,143 | | 574 | | 9,496 | | | Credit | 248 | | 170 | | — | | 418 | | | Foreign exchange | 3,641 | | 238 | | 10 | | 3,889 | | | Equity | 813 | | — | | 813 | | 1,626 | | | Commodity and other | 143 | | — | | 78 | | 221 | | | Total | 9,624 | | 4,551 | | 1,475 | | 15,650 | | | Total gross derivatives | $ | 9,634 | | $ | 4,738 | | $ | 1,475 | | $ | 15,847 | |
| | | | | | | | | | | | | | | | | Liabilities at December 31, 2025 | | $ in billions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 3 | | $ | 243 | | $ | — | | $ | 246 | | | Foreign exchange | 11 | | 2 | | — | | 13 | | | Total | 14 | | 245 | | — | | 259 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | 2 | | 17 | | — | | 19 | | | Other derivatives | | | | | | Interest rate | 5,041 | | 3,943 | | 715 | | 9,699 | | | Credit | 222 | | 171 | | — | | 393 | | | Foreign exchange | 3,791 | | 233 | | 19 | | 4,043 | | | Equity | 945 | | — | | 1,085 | | 2,030 | | | Commodity and other | 119 | | — | | 86 | | 205 | | | Total | 10,120 | | 4,364 | | 1,905 | | 16,389 | | | Total gross derivatives | $ | 10,134 | | $ | 4,609 | | $ | 1,905 | | $ | 16,648 | |
| | | | | | | | | | | | | | | | | Assets at December 31, 2024 | | $ in billions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | — | | $ | 108 | | $ | — | | $ | 108 | | | Foreign exchange | 14 | | 4 | | — | | 18 | | | Total | 14 | | 112 | | — | | 126 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | — | | — | | — | | — | | | Other derivatives | | | | | | Interest rate | 3,713 | | 4,367 | | 442 | | 8,522 | | | Credit | 208 | | 149 | | — | | 357 | | | Foreign exchange | 2,717 | | 171 | | 9 | | 2,897 | | | Equity | 591 | | — | | 609 | | 1,200 | | | Commodity and other | 137 | | — | | 77 | | 214 | | | Total | 7,366 | | 4,687 | | 1,137 | | 13,190 | | | Total gross derivatives | $ | 7,380 | | $ | 4,799 | | $ | 1,137 | | $ | 13,316 | |
| | | | | | | | | | | | | | | | | Liabilities at December 31, 2024 | | $ in billions | Bilateral
OTC | Cleared
OTC | Exchange-
Traded | Total | | Designated as accounting hedges | | Interest rate | $ | 2 | | $ | 193 | | $ | — | | $ | 195 | | | Foreign exchange | 1 | | — | | — | | 1 | | | Total | 3 | | 193 | | — | | 196 | | | Not designated as accounting hedges | | Economic hedges of loans | | | | | | Credit | 2 | | 20 | | — | | 22 | | | Other derivatives | | | | | | Interest rate | 3,626 | | 4,468 | | 417 | | 8,511 | | | Credit | 230 | | 133 | | — | | 363 | | | Foreign exchange | 2,763 | | 178 | | 18 | | 2,959 | | | Equity | 754 | | — | | 826 | | 1,580 | | | Commodity and other | 100 | | — | | 89 | | 189 | | | Total | 7,475 | | 4,799 | | 1,350 | | 13,624 | | | Total gross derivatives | $ | 7,478 | | $ | 4,992 | | $ | 1,350 | | $ | 13,820 | |
The notional amounts of derivative contracts generally overstate the Firm’s exposure. In most circumstances, notional amounts are used only as a reference point from which to calculate amounts owed between the parties to the contract. Furthermore, notional amounts do not reflect the benefit of legally enforceable netting arrangements or risk mitigating transactions. Gains (Losses) on Accounting Hedges | | | | | | | | | | | | | $ in millions | 2025 | 2024 | 2023 | | Fair value hedges—Recognized in Interest income | | Interest rate contracts | $ | (895) | | $ | 291 | | $ | (576) | | | Investment Securities—AFS | 943 | | (204) | | 638 | | | Fair value hedges—Recognized in Interest expense | | Interest rate contracts | $ | 3,982 | | $ | (822) | | $ | 3,664 | | | Deposits | (105) | | (75) | | (88) | | | Borrowings | (3,883) | | 889 | | (3,564) | | | Net investment hedges—Foreign exchange contracts | | Recognized in OCI | $ | (1,041) | | $ | 1,084 | | $ | (168) | | Forward points excluded from hedge effectiveness testing—Recognized in Interest income | 199 | | 214 | | 211 | | Cash flow hedges—Interest rate contracts1 | | Recognized in OCI | $ | (19) | | $ | (100) | | $ | 9 | | Less: Realized gains (losses) (pre-tax) reclassified from AOCI to interest income | (95) | | (32) | | (16) | | | Net change in cash flow hedges included within AOCI | 76 | | (68) | | 25 | |
1.For the year ended 2025, there were no forecasted transactions that failed to occur. The net gains (losses) associated with cash flow hedges expected to be reclassified from AOCI within 12 months as of December 31, 2025 is approximately $(68) million. The maximum length of time over which forecasted cash flows are hedged is 40 months. Fair Value Hedges—Hedged Items | | | | | | | | | | $ in millions | At December 31, 2025 | At December 31, 2024 | | Investment securities—AFS | | | Amortized cost basis currently or previously hedged1 | $ | 55,451 | | $ | 54,809 | | Basis adjustments included in amortized cost2 | $ | 217 | | $ | (741) | | | Deposits | | | | Carrying amount currently or previously hedged | $ | 53,224 | | $ | 21,524 | | Basis adjustments included in carrying amount2 | $ | 149 | | $ | 44 | | | Borrowings | | | | Carrying amount currently or previously hedged | $ | 199,274 | | $ | 171,834 | | | Basis adjustments included in carrying amount—Outstanding hedges | $ | (6,252) | | $ | (10,072) | | Basis adjustments included in carrying amount—Terminated hedges | $ | (625) | | $ | (648) | |
1.Carrying amount represents the amortized cost. As of December 31, 2025, and December 31, 2024, the amortized cost of the portfolio layer method closed portfolios was $589 million and $325 million, respectively. The Firm designated $703 million and $178 million as hedged amounts as of December 31, 2025, and December 31, 2024, respectively, representing the total notional value of all outstanding layers in each portfolio, including both spot-starting and forward-starting layers. The cumulative amount of basis adjustments was $2 million as of December 31, 2025 and $(2) million as of December 31, 2024. Refer to Note 2 to the financial statements in the 2025 Form 10-K and Note 7 herein for additional information. 2.Hedge accounting basis adjustments are primarily related to outstanding hedges. Gains (Losses) on Economic Hedges of Loans | | | | | | | | | | | | | $ in millions | 2025 | 2024 | 2023 | | Recognized in Other revenues | Credit contracts1 | (214) | | (294) | | (522) | |
1.Amounts related to hedges of certain held-for-investment and held-for-sale loans. Net Derivative Liabilities and Collateral Posted | | | | | | | | | | $ in millions | At December 31, 2025 | At December 31, 2024 | | Net derivative liabilities with credit risk-related contingent features | $ | 26,023 | | $ | 22,414 | | | Collateral posted | 20,152 | | 16,252 | |
The previous table presents the aggregate fair value of certain derivative contracts that contain credit risk-related contingent features that are in a net liability position for which the Firm has posted collateral in the normal course of business. Incremental Collateral and Termination Payments upon Potential Future Ratings Downgrade | | | | | | | $ in millions | At December 31, 2025 | | One-notch downgrade | $ | 310 | | | Two-notch downgrade | 520 | | Bilateral downgrade agreements included in the amounts above1 | $ | 705 | |
1.Amount represents arrangements between the Firm and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are used by the Firm to manage the risk of counterparty downgrades. The additional collateral or termination payments that may be called in the event of a future credit rating downgrade vary by contract and can be based on ratings by Moody’s Investors Service, Inc., S&P Global Ratings and/or other rating agencies. The previous table shows the future potential collateral amounts and termination payments that could be called or required by counterparties or exchange and clearing organizations in the event of one-notch or two-notch downgrade scenarios based on the relevant contractual downgrade triggers. Maximum Potential Payout/Notional of Credit Protection Sold1 | | | | | | | | | | | | | | | | | | | | Years to Maturity at December 31, 2025 | | $ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | | Single-name CDS | | Investment grade | $ | 16 | | $ | 34 | | $ | 37 | | $ | 11 | | $ | 98 | | | Non-investment grade | 8 | | 17 | | 16 | | 1 | | 42 | | | Total | $ | 24 | | $ | 51 | | $ | 53 | | $ | 12 | | $ | 140 | | | Index and basket CDS | | Investment grade | $ | 7 | | $ | 8 | | $ | 8 | | $ | — | | $ | 23 | | | Non-investment grade | 7 | | 32 | | 173 | | 18 | | 230 | | | Total | $ | 14 | | $ | 40 | | $ | 181 | | $ | 18 | | $ | 253 | | | Total CDS sold | $ | 38 | | $ | 91 | | $ | 234 | | $ | 30 | | $ | 393 | | | Other credit contracts | — | | — | | — | | 3 | | 3 | | | Total credit protection sold | $ | 38 | | $ | 91 | | $ | 234 | | $ | 33 | | $ | 396 | | | CDS protection sold with identical protection purchased | $ | 339 | |
| | | | | | | | | | | | | | | | | | | | Years to Maturity at December 31, 2024 | | $ in billions | < 1 | 1-3 | 3-5 | Over 5 | Total | | Single-name CDS | | Investment grade | $ | 15 | | $ | 31 | | $ | 37 | | $ | 10 | | $ | 93 | | | Non-investment grade | 7 | | 16 | | 16 | | 1 | | 40 | | | Total | $ | 22 | | $ | 47 | | $ | 53 | | $ | 11 | | $ | 133 | | | Index and basket CDS | | Investment grade | $ | 3 | | $ | 12 | | $ | 10 | | $ | — | | $ | 25 | | | Non-investment grade | 11 | | 22 | | 158 | | 16 | | 207 | | | Total | $ | 14 | | $ | 34 | | $ | 168 | | $ | 16 | | $ | 232 | | | Total CDS sold | $ | 36 | | $ | 81 | | $ | 221 | | $ | 27 | | $ | 365 | | | Other credit contracts | — | | — | | — | | 3 | | 3 | | | Total credit protection sold | $ | 36 | | $ | 81 | | $ | 221 | | $ | 30 | | $ | 368 | | | CDS protection sold with identical protection purchased | $ | 303 | |
Fair Value Asset (Liability) of Credit Protection Sold1 | | | | | | | | | | $ in millions | At December 31, 2025 | At December 31, 2024 | | Single-name CDS | | | | Investment grade | $ | 2,394 | | $ | 1,890 | | | Non-investment grade | 777 | | 585 | | | Total | $ | 3,171 | | $ | 2,475 | | | Index and basket CDS | | | | Investment grade | $ | 907 | | $ | 799 | | | Non-investment grade | 1,021 | | 489 | | | Total | $ | 1,928 | | $ | 1,288 | | | Total CDS sold | $ | 5,099 | | $ | 3,763 | | | Other credit contracts | 146 | | 133 | | | Total credit protection sold | $ | 5,245 | | $ | 3,896 | |
1.Investment grade/non-investment grade determination is based on the internal credit rating of the reference obligation. Internal credit ratings serve as the CRM’s assessment of credit risk and the basis for a comprehensive credit limits framework used to control credit risk. The Firm uses quantitative models and judgment to estimate the various risk parameters related to each obligor. Protection Purchased with CDS | | | | | | | | | | Notional | | $ in billions | At
December 31,
2025 | At
December 31,
2024 | | Single name | $ | 172 | | $ | 156 | | | Index and basket | 232 | | 193 | | | Tranched index and basket | 32 | | 28 | | | Total | $ | 436 | | $ | 377 | |
| | | | | | | | | | Fair Value Asset (Liability) | | $ in millions | At
December 31,
2025 | At
December 31,
2024 | | Single name | $ | (3,363) | | $ | (2,693) | | | Index and basket | (1,209) | | (654) | | | Tranched index and basket | (1,000) | | (962) | | | Total | $ | (5,572) | | $ | (4,309) | |
The Firm enters into credit derivatives, principally CDS, under which it receives or provides protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. A majority of the Firm’s counterparties for these derivatives are banks, broker-dealers, and insurance and other financial institutions. The fair value amounts as shown in the previous tables are prior to cash collateral or counterparty netting. The purchase of credit protection does not represent the sole manner in which the Firm risk manages its exposure to credit derivatives. The Firm manages its exposure to these derivative contracts through a variety of risk mitigation strategies, which include managing the credit and correlation risk across single-name, non-tranched indices and baskets, tranched indices and baskets, and cash positions. Aggregate market risk limits have been established for credit derivatives, and market risk measures are routinely monitored against these limits. The Firm may also recover amounts on the underlying reference obligation delivered to the Firm under CDS where credit protection was sold. Single-Name CDS. A CDS protects the buyer against the loss of principal on a bond or loan in case of a default by the issuer. The protection buyer pays a periodic premium (generally quarterly) over the life of the contract and is protected for the period. The Firm, in turn, performs under a CDS if a credit event as defined under the contract occurs. Typical credit events include bankruptcy, dissolution or insolvency of the referenced entity, failure to pay and restructuring of the obligations of the referenced entity. Index and Basket CDS. Index and basket CDS are products where credit protection is provided on a portfolio of single-name CDS. Generally, in the event of a default on one of the underlying names, the Firm pays a pro rata portion of the total notional amount of the CDS. The Firm also enters into tranched index and basket CDS where credit protection is provided on a particular portion of the portfolio loss distribution. The most junior tranches cover initial defaults, and once losses exceed the notional of the tranche, they are passed on to the next most senior tranche in the capital structure. Other Credit Contracts. The Firm has invested in CLNs and CDOs, which are hybrid instruments containing embedded derivatives, in which credit protection has been sold to the issuer of the note. If there is a credit event of a reference entity underlying the instrument, the principal balance of the note may not be repaid in full to the Firm.
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