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, foreign currency exposure management, and asset and 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 Firm-wide basis, on a worldwide trading division level and on an individual product basis.

Derivative Fair Values
At December 31, 2018
	Assets
$ in millions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	512	$	1	$	—	$	513
Foreign exchange contracts		27		8		—		35
Total		539		9		—		548
Not designated as accounting hedges
Interest rate contracts		153,768		3,887		697		158,352
Credit contracts		4,630		1,498		—		6,128
Foreign exchange contracts		61,846		1,310		55		63,211
Equity contracts		24,590		—		23,284		47,874
Commodity and other contracts		10,538		—		1,934		12,472
Total		255,372		6,695		25,970		288,037
Total gross derivatives	$	255,911	$	6,704	$	25,970	$	288,585
Amounts offset
Counterparty netting		(190,220)		(5,260)		(24,548)		(220,028)
Cash collateral netting		(38,204)		(1,180)		—		(39,384)
Total in Trading assets	$	27,487	$	264	$	1,422	$	29,173
Amounts not offset¹
Financial instruments collateral		(12,467)		—		—		(12,467)
Other cash collateral		(31)		—		—		(31)
Net amounts	$	14,989	$	264	$	1,422	$	16,675
Net amounts for which master netting or collateral agreements
are not in place or may not be legally enforceable							$	2,206

	Liabilities
$ in millions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	176	$	—	$	—	$	176
Foreign exchange contracts		62		24		—		86
Total		238		24		—		262
Not designated as accounting hedges
Interest rate contracts		142,592		2,669		663		145,924
Credit contracts		4,545		1,608		—		6,153
Foreign exchange contracts		62,099		1,302		19		63,420
Equity contracts		27,119		—		23,521		50,640
Commodity and other contracts		6,983		—		2,057		9,040
Total		243,338		5,579		26,260		275,177
Total gross derivatives	$	243,576	$	5,603	$	26,260	$	275,439
Amounts offset
Counterparty netting		(190,220)		(5,260)		(24,548)		(220,028)
Cash collateral netting		(27,860)		(293)		—		(28,153)
Total in Trading liabilities	$	25,496	$	50	$	1,712	$	27,258
Amounts not offset¹
Financial instruments collateral		(4,709)		—		(766)		(5,475)
Other cash collateral		(53)		(1)		—		(54)
Net amounts	$	20,734	$	49	$	946	$	21,729
Net amounts for which master netting or collateral agreements
are not in place or may not be legally enforceable							$	4,773

At December 31, 2017
		Assets
$ in millions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	1,057	$	—	$	—	$	1,057
Foreign exchange contracts		57		6		—		63
Total		1,114		6		—		1,120
Not designated as accounting hedges
Interest rate contracts		177,948		1,700		234		179,882
Credit contracts		5,740		2,282		—		8,022
Foreign exchange contracts		52,878		798		58		53,734
Equity contracts		24,452		—		20,538		44,990
Commodity and other contracts		8,861		—		1,802		10,663
Total		269,879		4,780		22,632		297,291
Total gross derivatives	$	270,993	$	4,786	$	22,632	$	298,411
Amounts offset
Counterparty netting		(201,051)		(3,856)		(19,861)		(224,768)
Cash collateral netting		(42,141)		(689)		—		(42,830)
Total in Trading assets	$	27,801	$	241	$	2,771	$	30,813
Amounts not offset¹
Financial instruments collateral		(12,363)		—		—		(12,363)
Other cash collateral		(4)		—		—		(4)
Net amounts	$	15,434	$	241	$	2,771	$	18,446
Net amounts for which master netting or collateral agreements
are not in place or may not be legally enforceable							$	3,154

		Liabilities
$ in millions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	67	$	1	$	—	$	68
Foreign exchange contracts		72		57		—		129
Total		139		58		—		197
Not designated as accounting hedges
Interest rate contracts		161,758		1,178		144		163,080
Credit contracts		6,273		2,272		—		8,545
Foreign exchange contracts		54,191		925		23		55,139
Equity contracts		27,993		—		19,996		47,989
Commodity and other contracts		7,117		—		1,772		8,889
Total		257,332		4,375		21,935		283,642
Total gross derivatives	$	257,471	$	4,433	$	21,935	$	283,839
Amounts offset
Counterparty netting		(201,051)		(3,856)		(19,861)		(224,768)
Cash collateral netting		(31,892)		(484)		—		(32,376)
Total in Trading liabilities	$	24,528	$	93	$	2,074	$	26,695
Amounts not offset¹
Financial instruments collateral		(5,523)		—		(412)		(5,935)
Other cash collateral		(18)		(14)		—		(32)
Net amounts	$	18,987	$	79	$	1,662	$	20,728
Net amounts for which master netting or collateral agreements
are not in place or may not be legally enforceable							$	3,751

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 criteria are not met in accordance with applicable offsetting accounting guidance.

See Note 3 for information related to the unsettled fair value of futures contracts not designated as accounting hedges, which are excluded from the previous tables

Derivative Notionals
At December 31, 2018
	Assets
$ in billions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	15	$	52	$	—	$	67
Foreign exchange contracts		5		1		—		6
Total		20		53		—		73
Not designated as accounting hedges
Interest rate contracts		4,807		6,708		1,157		12,672
Credit contracts		162		74		—		236
Foreign exchange contracts		2,436		118		14		2,568
Equity contracts		373		—		371		744
Commodity and other contracts		97		—		67		164
Total		7,875		6,900		1,609		16,384
Total gross derivatives	$	7,895	$	6,953	$	1,609	$	16,457

	Liabilities
$ in billions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	2	$	107	$	—	$	109
Foreign exchange contracts		5		1		—		6
Total		7		108		—		115
Not designated as accounting hedges
Interest rate contracts		4,946		5,735		781		11,462
Credit contracts		162		73		—		235
Foreign exchange contracts		2,451		114		17		2,582
Equity contracts		389		—		602		991
Commodity and other contracts		72		—		65		137
Total		8,020		5,922		1,465		15,407
Total gross derivatives	$	8,027	$	6,030	$	1,465	$	15,522

At December 31, 2017
	Assets
$ in billions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	20	$	46	$	—	$	66
Foreign exchange contracts		4		—		—		4
Total		24		46		—		70
Not designated as accounting hedges
Interest rate contracts		3,999		6,458		2,714		13,171
Credit contracts		194		100		—		294
Foreign exchange contracts		1,960		67		9		2,036
Equity contracts		397		—		334		731
Commodity and other contracts		86		—		72		158
Total		6,636		6,625		3,129		16,390
Total gross derivatives	$	6,660	$	6,671	$	3,129	$	16,460

	Liabilities
$ in billions		Bilateral OTC		Cleared OTC		Exchange-Traded		Total
Designated as accounting hedges
Interest rate contracts	$	2	$	102	$	—	$	104
Foreign exchange contracts		4		2		—		6
Total		6		104		—		110
Not designated as accounting hedges
Interest rate contracts		4,199		6,325		1,089		11,613
Credit contracts		226		80		—		306
Foreign exchange contracts		2,014		78		51		2,143
Equity contracts		394		—		405		799
Commodity and other contracts		68		—		61		129
Total		6,901		6,483		1,606		14,990
Total gross derivatives	$	6,907	$	6,587	$	1,606	$	15,100

The Firm believes that the notional amounts of derivative contracts generally overstate its exposure. In most circumstances notional amounts are only used 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		2018	2017		2016
Fair Value Hedges—Recognized in Interest Expense
Interest rate contracts	$	(1,529)	$	(1,591)	$	(1,738)
Borrowings		1,511		1,393		1,541
Net Investment Hedges—Foreign exchange contracts
Recognized in OCI	$	295	$	(365)	$	(1)
Forward points excluded from hedge effectiveness
testing—Recognized in Interest income		68		(20)		(74)

1. In the third quarter of 2018, the Firm began designating interest rate swaps as fair value hedges of certain AFS securities. Amounts recognized in interest income and basis adjustments related to AFS securities were not material.

2. Carrying amount represents amortized cost basis.

3. Hedge accounting basis adjustments for Borrowings are primarily related to outstanding hedges.

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 either or both of Moody’s Investors Service, Inc. (“Moody’s”) and S&P Global Ratings. 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.

Credit Derivatives and Other Credit Contracts

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.

Maximum Potential Payout/Notional of Credit Protection Sold¹

	Years to Maturity at December 31, 2018
$ in millions		< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	22,297	$	23,876	$	19,469	$	7,844	$	73,486
Non-investment grade		10,135		11,061		9,020		861		31,077
Total	$	32,432	$	34,937	$	28,489	$	8,705	$	104,563
Index and basket CDS
Investment grade	$	5,341	$	9,901	$	60,887	$	6,816	$	82,945
Non-investment grade		4,574		5,820		12,855		13,272		36,521
Total	$	9,915	$	15,721	$	73,742	$	20,088	$	119,466
Total CDS sold	$	42,347	$	50,658	$	102,231	$	28,793	$	224,029
Other credit contracts		—		—		—		116		116
Total credit protection
sold	$	42,347	$	50,658	$	102,231	$	28,909	$	224,145
CDS protection sold with identical protection purchased									$	209,972

	Years to Maturity at December 31, 2017
$ in millions		< 1		1-3		3-5		Over 5		Total
Single-name CDS
Investment grade	$	39,721	$	42,591	$	18,157	$	8,872	$	109,341
Non-investment grade		14,213		16,293		6,193		908		37,607
Total	$	53,934	$	58,884	$	24,350	$	9,780	$	146,948
Index and basket CDS
Investment grade	$	29,046	$	15,418	$	37,343	$	6,807	$	88,614
Non-investment grade		5,246		7,371		32,417		9,289		54,323
Total	$	34,292	$	22,789	$	69,760	$	16,096	$	142,937
Total CDS sold	$	88,226	$	81,673	$	94,110	$	25,876	$	289,885
Other credit contracts		2		—		—		134		136
Total credit protection
sold	$	88,228	$	81,673	$	94,110	$	26,010	$	290,021
CDS protection sold with identical protection purchased									$	274,473

Fair Value (Asset)/Liability of Credit Protection Sold¹


		At		At
$ in millions		December 31, 2018		December 31, 2017
Single-name CDS
Investment grade	$	(118)	$	(1,167)
Non-investment grade		403		(110)
Total	$	285	$	(1,277)
Index and basket CDS
Investment grade	$	(314)	$	(1,091)
Non-investment grade		1,413		408
Total	$	1,099	$	(683)
Total CDS sold	$	1,384	$	(1,960)
Other credit contracts		14		16
Total credit protection sold	$	1,398	$	(1,944)

The fair value amounts as shown in the previous table are prior to cash collateral or counterparty netting. Internal credit ratings serve as the Credit Risk Management Department’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.

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.