Quarterly report pursuant to Section 13 or 15(d)

Fair Value Disclosures (Tables)

v2.4.0.6
Fair Value Disclosures (Tables)
 3 Months Ended
Mar. 31, 2013
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
(dollars in millions)
 
Fair Value Measurements on a Recurring Basis
 
as of December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Netting
Adj(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Securities segregated for regulatory purposes or deposited with clearing organizations:
 
 
 
 
 
 
 
 
 
Non-U.S. governments and agencies
$
—

 
$
1,833

 
$
—

 
$
—

 
$
1,833

U.S. Government and agencies
3,558

 
250

 
—

 
—

 
3,808

Total securities segregated for regulatory purposes or deposited with clearing organizations
3,558

 
2,083

 
—

 
—

 
5,641

Receivables under resale agreements
—

 
93,715

 
—

 
—

 
93,715

Receivables under securities borrowed transactions
—

 
961

 
—

 
—

 
961

Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
23,813

 
12,340

 
178

 
—

 
36,331

Convertible debentures
—

 
4,272

 
15

 
—

 
4,287

Non-U.S. governments and agencies
26,834

 
2,936

 
353

 
—

 
30,123

Corporate debt
—

 
16,068

 
1,900

 
—

 
17,968

Preferred stock
—

 
116

 
253

 
—

 
369

Mortgages, mortgage-backed and asset-backed
—

 
5,799

 
4,814

 
—

 
10,613

U.S. Government and agencies
26,201

 
28,363

 
—

 
—

 
54,564

Municipals and money markets
1,292

 
9,201

 
1,295

 
—

 
11,788

Physical commodities and other
—

 
692

 
—

 
—

 
692

 Total trading assets, excluding derivative contracts
78,140

 
79,787

 
8,808

 
—

 
166,735

  Derivative contracts(2)
2,691

 
657,621

 
5,677

 
(641,138
)
 
24,851

Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Government and agencies
390

 
—

 
—

 
—

 
390

Securities, mortgage-backed and asset backed
 
 
 
 
 
 
 
 
 
     Non-agency MBS
—

 
40

 
—

 
—

 
40

     Corporate ABS
—

 
218

 
8

 
—

 
226

Total investment securities available-for-sale
390

 
258

 
8

 
—

 
656

Other debt securities carried at fair value (3)
 
 
 
 
 
 
 
 
 
    Non-U.S. governments and agencies
7,422

 
300

 
—

 
—

 
7,722

Total other debt securities carried at fair value
7,422

 
300

 
—

 
—

 
7,722

Investment securities non-qualifying
2,254

 
1,056

 
287

 
—

 
3,597

Total investment securities
10,066

 
1,614

 
295

 
—

 
11,975

Securities received as collateral
15,426

 
587

 
—

 
—

 
16,013

Loans, notes and mortgages
—

 
1,396

 
1,681

 
—

 
3,077

Other
—

 
12

 
1,534

 
—

 
1,546

Liabilities:
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
—

 
42,639

 
—

 
—

 
42,639

Short-term borrowings
—

 
3,283

 
—

 
—

 
3,283

Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
16,225

 
2,557

 
—

 
—

 
18,782

Convertible debentures
—

 
175

 
—

 
—

 
175

Non-U.S. governments and agencies
18,382

 
1,325

 
—

 
—

 
19,707

Corporate debt
—

 
7,912

 
31

 
—

 
7,943

Preferred stock
—

 
83

 
—

 
—

 
83

U.S. Government and agencies
19,276

 
910

 
—

 
—

 
20,186

Municipals, money markets and other
487

 
43

 
32

 
—

 
562

Total trading liabilities, excluding derivative contracts
54,370

 
13,005

 
63

 
—

 
67,438

Derivative contracts(2)
2,449

 
659,271

 
4,133

 
(645,285
)
 
20,568

Obligation to return securities received as collateral
15,426

 
587

 
—

 
—

 
16,013

Other payables — interest and other
—

 
50

 
7

 
—

 
57

Long-term borrowings
—

 
29,559

 
1,316

 
—

 
30,875

 
 
 
 
 
 
 
 
 
 
(1) 
Represents counterparty and cash collateral netting.
(2) 
See Note 6 for product level detail.
(3) 
Certain assets that are used for liquidity management purposes were reclassified from Trading assets to Other debt securities carried at fair value during the three months ended March 31, 2013. Prior period amounts have been reclassified to conform with the current period presentation.

(dollars in millions)
 
Fair Value Measurements on a Recurring Basis
 
as of March 31, 2013
 
Level 1
 
Level 2
 
Level 3
 
Netting
Adj(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Securities segregated for regulatory purposes or deposited with clearing organizations:
 
 
 
 
 
 
 
 
 
Non-U.S. governments and agencies
$
—

 
$
2,680

 
$
—

 
$
—

 
$
2,680

U.S. Government and agencies
4,425

 
250

 
—

 
—

 
4,675

Total securities segregated for regulatory purposes or deposited with clearing organizations
4,425

 
2,930

 
—

 
—

 
7,355

Receivables under resale agreements
—

 
89,969

 
—

 
—

 
89,969

Receivables under securities borrowed transactions
—

 
1,282

 
—

 
—

 
1,282

Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
24,421

 
11,298

 
175

 
—

 
35,894

Convertible debentures
—

 
3,898

 
14

 
—

 
3,912

Non-U.S. governments and agencies
31,441

 
3,395

 
417

 
—

 
35,253

Corporate debt
—

 
15,592

 
1,840

 
—

 
17,432

Preferred stock
—

 
169

 
208

 
—

 
377

Mortgages, mortgage-backed and asset-backed
—

 
6,197

 
4,368

 
—

 
10,565

U.S. Government and agencies
20,258

 
23,593

 
—

 
—

 
43,851

Municipals and money markets
1,580

 
8,468

 
1,079

 
—

 
11,127

Physical commodities and other
—

 
647

 
—

 
—

 
647

Total trading assets, excluding derivative contracts
77,700

 
73,257

 
8,101

 
—

 
159,058

Derivative contracts(2)
5,043

 
576,851

 
5,437

 
(559,824
)
 
27,507

Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. Government and agencies
403

 
—

 
—

 
—

 
403

Securities, mortgage-backed and asset backed
 
 
 
 
 
 
 
 
 
     Non-agency MBS
—

 
37

 
—

 
—

 
37

     Corporate ABS
—

 
167

 
8

 
—

 
175

Total investment securities available-for-sale
403

 
204

 
8

 
—

 
615

Other debt securities carried at fair value (3)
 
 
 
 
 
 
 
 
 
    Non-U.S. governments and agencies
7,202

 
300

 
—

 
—

 
7,502

    Corporate debt
—

 
10

 
—

 
—

 
10

Total other debt securities carried at fair value
7,202

 
310

 
—

 
—

 
7,512

Investment securities non-qualifying
1,777

 
1,320

 
288

 
—

 
3,385

Total investment securities
9,382

 
1,834

 
296

 
—

 
11,512

Securities received as collateral
12,016

 
1,350

 
—

 
—

 
13,366

Loans, notes and mortgages
—

 
657

 
1,436

 
—

 
2,093

   Other
—

 
—

 
1,086

 
—

 
1,086

Liabilities:
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
—

 
47,842

 
—

 
—

 
47,842

Short-term borrowings
—

 
2,401

 
—

 
—

 
2,401

Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
17,799

 
2,747

 
—

 
—

 
20,546

Convertible debentures
—

 
157

 
—

 
—

 
157

Non-U.S. governments and agencies
27,483

 
1,409

 
—

 
—

 
28,892

Corporate debt
—

 
9,642

 
16

 
—

 
9,658

Preferred stock
—

 
216

 
—

 
—

 
216

U.S. Government and agencies
18,388

 
447

 
—

 
—

 
18,835

Municipals, money markets and other
574

 
25

 
42

 
—

 
641

Total trading liabilities, excluding derivative contracts
64,244

 
14,643

 
58

 
—

 
78,945

 Derivative contracts(2)
3,834

 
577,207

 
4,255

 
(561,389
)
 
23,907

Obligation to return securities received as collateral
12,016

 
1,350

 
—

 
—

 
13,366

Other payables — interest and other
—

 
45

 
4

 
—

 
49

Long-term borrowings
—

 
32,283

 
1,285

 
—

 
33,568

 
 
 
 
 
 
 
 
 
 
(1) 
Represents counterparty and cash collateral netting.
(2) 
See Note 6 for product level detail.
(3) 
Certain assets that are used for liquidity management purposes were reclassified from Trading assets to Other debt securities carried at fair value during the three months ended March 31, 2013. Prior period amounts have been reclassified to conform with the current period presentation.
Fair Value, Assets and Liabilities Measured on Recurring Basis, Gain (Loss) Included in Earnings
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Financial Assets and Liabilities
Three Months Ended March 31, 2013
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains or (Losses) to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
178

 
$
20

 
$
—

 
$
—

 
$
20

 
$
—

 
(50
)
 
23

 
$
—

 
—

 
$
7

 
$
(3
)
 
$
175

Convertible debentures
15

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
—

 
—

 
—

 
2

 
(1
)
 
14

Non-U.S. governments and agencies
353

 
51

 
—

 
—

 
51

 
—

 
(1
)
 
15

 
—

 
—

 
—

 
(1
)
 
417

Corporate debt
1,900

 
54

 
—

 
—

 
54

 
—

 
(235
)
 
187

 
—

 
(121
)
 
158

 
(103
)
 
1,840

Preferred stock
253

 
22

 
—

 
—

 
22

 
—

 
(59
)
 
6

 
—

 
—

 
1

 
(15
)
 
208

Mortgages, mortgage-backed and asset-backed
4,814

 
162

 
—

 
—

 
162

 
—

 
(635
)
 
653

 
—

 
(629
)
 
3

 
—

 
4,368

Municipals and money markets
1,295

 
25

 
—

 
—

 
25

 
—

 
(651
)
 
355

 
—

 
(1
)
 
56

 
—

 
1,079

Total trading assets, excluding derivative contracts
8,808

 
334

 
—

 
—

 
334

 
—

 
(1,633
)
 
1,239

 
—

 
(751
)
 
227

 
(123
)
 
8,101

Derivative contracts, net
1,544

 
(186
)
 
—

 
—

 
(186
)
 
—

 
(226
)
 
92

 
—

 
(91
)
 
76

 
(27
)
 
1,182

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate ABS
8

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
8

Total investment securities available-for-sale
8

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
8

Investment securities non-qualifying
287

 
—

 
(3
)
 
—

 
(3
)
 
—

 
(7
)
 
11

 
—

 
—

 
—

 
—

 
288

Total investment securities
295

 
—

 
(3
)
 
—

 
(3
)
 
—

 
(7
)
 
11

 
—

 
—

 
—

 
—

 
296

Loans, notes and mortgages
1,681

 
—

 
(52
)
 
7

 
(45
)
 
—

 
(186
)
 
—

 
—

 
(14
)
 
—

 
—

 
1,436

Other
1,534

 
—

 
(448
)
 
—

 
(448
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,086

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
31

 
—

 
—

 
—

 
—

 
—

 
2

 
(5
)
 
—

 
—

 
8

 
(20
)
 
16

Municipals, money markets and other
32

 
—

 
—

 
—

 
—

 
—

 
11

 
(2
)
 
1

 
—

 
—

 
—

 
42

Total trading liabilities, excluding derivative contracts
63

 
—

 
—

 
—

 
—

 
—

 
13

 
(7
)
 
1

 
—

 
8

 
(20
)
 
58

Other payables - interest and other
7

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
—

 
(1
)
 
4

Long-term borrowings
1,316

 
22

 
(4
)
 
—

 
18

 
—

 
4

 
(69
)
 
36

 
(47
)
 
185

 
(122
)
 
1,285

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Transfers in and out for corporate debt primarily relate to changes in market liquidity for certain corporate loans and securities. Transfers in and out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Financial Assets and Liabilities
Three Months Ended March 31, 2012
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains or (Losses) to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
179

 
$
1

 
$
—

 
$
—

 
$
1

 
$
—

 
$
(39
)
 
$
41

 
$
—

 
$
(9
)
 
$
7

 
$
(2
)
 
$
178

Convertible debentures
99

 
2

 
—

 
—

 
2

 
—

 
(53
)
 
—

 
—

 
—

 
5

 
(10
)
 
43

Non-U.S. governments and agencies
342

 
24

 
—

 
—

 
24

 
—

 
(81
)
 
273

 
—

 
—

 
—

 
(12
)
 
546

Corporate debt
3,962

 
85

 
—

 
—

 
85

 
—

 
(523
)
 
368

 
—

 
(154
)
 
56

 
(376
)
 
3,418

Preferred stock
227

 
12

 
—

 
—

 
12

 
—

 
(70
)
 
38

 
—

 
(1
)
 
1

 
—

 
207

Mortgages, mortgage-backed and asset-backed
3,199

 
90

 
—

 
—

 
90

 
—

 
(230
)
 
166

 
—

 
(80
)
 
736

 
(113
)
 
3,768

Municipals and money markets
2,047

 
(6
)
 
—

 
—

 
(6
)
 
—

 
(132
)
 
134

 
—

 
(11
)
 
—

 
(23
)
 
2,009

Total trading assets, excluding derivative contracts
10,055

 
208

 
—

 
—

 
208

 
—

 
(1,128
)
 
1,020

 
—

 
(255
)
 
805

 
(536
)
 
10,169

Derivative contracts, net
4,495

 
(701
)
 
—

 
—

 
(701
)
 
—

 
(258
)
 
353

 
—

 
(375
)
 
59

 
(366
)
 
3,207

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate ABS
47

 
—

 
(2
)
 
—

 
(2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
45

Total investment securities available-for-sale
47

 
—

 
(2
)
 
—

 
(2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
45

Investment securities non-qualifying
574

 
—

 
(7
)
 
—

 
(7
)
 
—

 
(13
)
 
9

 
—

 
(142
)
 
—

 
—

 
421

Total investment securities
621

 
—

 
(9
)
 
—

 
(9
)
 
—

 
(13
)
 
9

 
—

 
(142
)
 
—

 
—

 
466

Loans, notes and mortgages
1,726

 
—

 
95

 
7

 
102

 
—

 
—

 
4

 
—

 
(23
)
 
—

 
—

 
1,809

    Other assets
1,349

 
—

 
(47
)
 
—

 
(47
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,302

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
52

 
—

 
—

 
—

 
—

 
—

 
19

 
(38
)
 
—

 
—

 
1

 
(34
)
 
—

Preferred stock
16

 
(2
)
 
—

 
—

 
(2
)
 
—

 
—

 
(4
)
 
—

 
—

 
—

 
—

 
14

Municipals, money markets and other
45

 
1

 
—

 
—

 
1

 
—

 
6

 
(6
)
 
1

 
—

 
—

 
—

 
45

Total trading liabilities, excluding derivative contracts
113

 
(1
)
 
—

 
—

 
(1
)
 
—

 
25

 
(48
)
 
1

 
—

 
1

 
(34
)
 
59

Other payables - interest and other
10

 
—

 
3

 
—

 
3

 
—

 
—

 
(1
)
 
—

 
—

 
—

 
(3
)
 
3

Long-term borrowings
2,186

 
(139
)
 
(44
)
 
—

 
(183
)
 
—

 
33

 
(68
)
 
28

 
(377
)
 
222

 
(464
)
 
1,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Fair Value, Measured on Recurring Basis, Unrecognized Gain (Loss) Included in Earnings on Assets and Liabilities related to Level 3 Still Held
The following tables provide the portion of gains or losses included in income for the three months ended March 31, 2013 and March 31, 2012 attributable to unrealized gains or losses relating to those Level 3 assets and liabilities held at March 31, 2013 and March 31, 2012, respectively.
(dollars in millions)
 
 
 
 
 
 
 
Unrealized Gains or (Losses) for Level 3
Assets and Liabilities Still Held
 
 
Three Months ended March 31, 2013
 
 
Principal
Transactions
 
Other
Revenue
 
Total
Assets:
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
Equities
 
$
21

 
$
—

 
$
21

Non-U.S. governments and agencies
 
51

 
—

 
51

Corporate debt
 
38

 
—

 
38

Preferred stock
 
12

 
—

 
12

Mortgages, mortgage-backed and asset-backed
 
89

 
—

 
89

Municipals and money markets
 
8

 
—

 
8

Total trading assets, excluding derivative contracts
 
219

 
—

 
219

Derivative contracts, net
 
(245
)
 
—

 
(245
)
Investment securities non-qualifying
 
—

 
(3
)
 
(3
)
Loans, notes and mortgages
 
—

 
(53
)
 
(53
)
Other
 
—

 
(448
)
 
(448
)
Liabilities:
 
 
 
 
 
 
Long-term borrowings
 
21

 
(4
)
 
17



(dollars in millions)
 
 
 
 
 
 
 
Unrealized Gains or (Losses) for Level 3
Assets and Liabilities Still Held
 
 
Three Months Ended March 31, 2012
 
 
Principal
Transactions
 
Other
Revenue
 
Total
Assets:
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
Equities
 
$
6

 
$
—

 
$
6

Convertible debentures
 
2

 
—

 
2

Non-U.S. governments and agencies
 
13

 
—

 
13

Corporate debt
 
62

 
—

 
62

Preferred stock
 
3

 
—

 
3

Mortgages, mortgage-backed and asset-backed
 
50

 
—

 
50

Municipals and money markets
 
(8
)
 
—

 
(8
)
Total trading assets, excluding derivative contracts
 
128

 
—

 
128

Derivative contracts, net
 
(613
)
 
—

 
(613
)
Investment securities non-qualifying
 
—

 
(10
)
 
(10
)
Total investment securities
 
—

 
(10
)
 
(10
)
Loans, notes and mortgages
 
—

 
96

 
96

Other assets
 
—

 
(47
)
 
(47
)
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
Preferred Stock
 
(2
)
 
—

 
(2
)
Municipals, money markets and other
 
1

 
—

 
1

Total trading liabilities, excluding derivative contracts
 
(1
)
 
—

 
(1
)
Other payables — interest and other
 
—

 
3

 
3

Long-term borrowings
 
(129
)
 
(44
)
 
(173
)

Fair Value Inputs, Assets and Liabilities, Quantitative Information
The following tables present information about significant unobservable inputs related to material components of Merrill Lynch's Level 3 financial assets and liabilities at March 31, 2013 and December 31, 2012.
Quantitative Information about Level 3 Fair Value Measurements at March 31, 2013
(dollars in millions)
 
 
 
 
 
Financial Instrument
Fair Value
Valuation Techniques
Significant Unobservable Inputs
Ranges of Inputs
Weighted Average
Loans and Securities
 
 
 
 
 
Instruments backed by residential real estate assets
$
1,337

Discounted Cash Flow
Yield
2% to 25%
7
%
Loans, notes and mortgages
972

Prepayment Speeds (CPR)
6% to 8%
7
%
Trading assets - Mortgages, mortgage-backed and asset-backed
365

Default Rates (CDR)
1% to 3%
2
%
 


Loss Severities
35% to 45%
41
%
Instruments backed by commercial real estate assets


Discounted Cash Flow
Yield
5%
5
%
Other
$
1,086

Loss Severities
51% to 100%
80
%
Commercial loans, debt securities and other
$
6,307

Discounted Cash Flow, Market Comparables
Yield
0% to 33%
5
%
Loans, notes and mortgages
464

Enterprise Value/EBITDA multiple
2x to 17x
6
x
Trading assets - Mortgages, mortgage-backed and asset-backed
4,003

Prepayment Speed
5% to 40%
20
%
Trading assets - Corporate debt
1,840

Default Rates
1% to 5%
4
%
 


Loss Severity
25% to 40%
35
%
Auction Rate Securities


Market Comparables




Trading assets - Municipals and money markets
$
1,079

Projected tender price / re-financing level
50% to 100%
92
%
Long-term borrowings
$
1,285

Industry Standard Derivative Pricing (1)
Equity Correlation
30% to 97%
73
%
 


Long- Dated Volatilities
15% to 115%
26
%
(1) Includes models such as Monte Carlo simulation and Black-Scholes.

CPR = Constant Prepayment Rate
CDR = Constant Default Rate










Quantitative Information about Level 3 Fair Value Measurements at March 31, 2013
(dollars in millions)
 
 
 
Financial Instrument
Fair Value
Valuation Techniques
Significant Unobservable Inputs
Ranges of Inputs
Weighted Average
Net Derivative Contracts
 
 


 
   Credit derivatives
$
1,448

Discounted Cash Flow, Stochastic Recovery Correlation Model
Yield
2% to 25%
13
%
 


Credit spreads
37bps to 346bps
200 bps

 


Upfront points
12 to 100 points
64 points

 


Spread to index
-1,657 bps to 1,988bps
421 bps

 


Credit correlation
21% to 75%
41
%
 


Prepayment speed (CPR)
4% to 30%
8
%
 


Default rates (CDR)
1% to 5%
4
%
 


Loss severity
25% to 40%
35
%
   Equity derivatives
$
(880
)
Industry Standard Derivative Pricing (1)
Equity Correlation
30% to 97%
73
%
 


Long-Dated Volatilities
15% to 115%
26
%
   Commodity derivatives
$
(4
)
Discounted Cash Flow
Natural gas forward price
$3/MMBtu to $12/MMBtu
$7/MMBtu

   Interest rate derivatives
$
618

Industry Standard Derivative Pricing (1)
Correlation (IR/IR)
19% to 99%
62
%
 


Correlation (FX/IR)
-65% to 50%
2
%
 


Long-Dated Inflation Rates
2% to 3%
2
%
 


Long-Dated Inflation Volatilities
0% to 2%
1
%
Total net derivative contracts
$
1,182

 
 
 
 
(1) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.

IR = Interest Rate
FX = Foreign Exchange
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
(dollars in millions)
 
 
 
 
 
Financial Instrument
Fair Value
Valuation Techniques
Significant Unobservable Inputs
Ranges of Inputs
Weighted Average
Loans and Securities
 
 
 
 
 
Instruments backed by residential real estate assets
$
1,608

Discounted Cash Flow
Yield
4% to 25%
7
%
Loans, notes and mortgages
1,231

Prepayment Speeds (CPR)
3% to 10%
7
%
Trading assets - Mortgages, mortgage-backed and asset-backed
377

Default Rates (CDR)
1% to 3%
2
%
 
 
Loss Severities
35% to 45%
41
%
Instruments backed by commercial real estate assets

Discounted Cash Flow
Yield
5%
5
%
Other
$
1,534

Loss Severities
51% to 100%
88
%
 
 
 
 
 
 
Commercial loans, debt securities and other
$
6,787

Discounted Cash Flow, Market Comparables
Yield
0% to 25%
5
%
Loans, notes and mortgages
450

Enterprise Value/EBITDA multiple
2x to 11x
6
x
Trading assets - Mortgages, mortgage-backed and asset-backed
4,437

Prepayment Speed
5% to 30%
20
%
Trading assets - Corporate debt
1,900

Default Rates
1% to 5%
4
%
 
 
Loss Severity
25% to 40%
35
%
Auction Rate Securities
 
Market Comparables
 
 
 
Trading assets - Municipals and money markets
$
1,295

Projected tender price / re-financing level
50% to 100%
90
%
 
 
 
 
 
 
Long-term borrowings
$
1,316

Industry Standard Derivative Pricing (1)
Equity Correlation
30% to 97%
(2) 

 
 
Long- Dated Volatilities
20% to 70%
(2) 

(1) Includes models such as Monte Carlo simulation and Black-Scholes.
(2) For further information on the ranges of inputs for equity correlation and long-dated volatilities, see the qualitative equity derivatives disclosure below.

CPR = Constant Prepayment Rate
CDR = Constant Default Rate










Quantitative Information about Level 3 Fair Value Measurements at December 31, 2012
(dollars in millions)
 
 
 
 
Financial Instrument
Fair Value
Valuation Techniques
Significant
Unobservable Inputs
Ranges of Inputs
Net Derivative Contracts
 
 
 
 
   Credit derivatives
$1,632
Discounted Cash Flow, Stochastic Recovery Correlation Model
Yield
2% to 25%
 
 
Credit spreads
58bps to 615bps
 
 
Upfront points
25 to 99 points
 
 
Spread to index
-2,080bps to 1,972bps
 
 
Credit correlation
19% to 75%
 
 
Prepayment speed (CPR)
3% to 30%
 
 
Default rates (CDR)
1% to 5%
 
 
Loss severity
25% to 40%
   Equity derivatives
$
(814
)
Industry Standard Derivative Pricing (1)
Equity Correlation
30% to 97%
 
 
Long-Dated Volatilities
20% to 70%
   Commodity derivatives
$
(5
)
Discounted Cash Flow
Natural gas forward price
$3/MMBtu to $12/MMBtu
   Interest rate derivatives
$
731

Industry Standard Derivative Pricing (1)
Correlation (IR/IR)
15% to 99%
 
 
Correlation (FX/IR)
-65% to 50%
 
 
Long-Dated Inflation Rates
2% to 3%
 
 
Long-Dated Inflation Volatilities
0% to 1%
 
 
Long-Dated Volatilities (FX)
5% to 36%
 
 
Long-Dated Swap Rates
8% to 10%
Total net derivative contracts
$
1,544

 
 
 
(1) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.

IR = Interest Rate
FX = Foreign Exchange
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
MMBtu = Million British thermal units
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis

(dollars in millions)
 
 
 
 
Non-Recurring Basis
 
Gains/(Losses)
 
Gains/(Losses)
 
as of March 31, 2013
 
Three Months Ended
 
Three Months Ended
 
 
Level 2
 
Level 3
 
Total
 
March 31, 2013
 
March 31, 2012
Assets:
 
 
 
 
 
 
 
 
 
 
Loans, notes and mortgages
 
$
—

 
$
144

 
$
144

 
$
(82
)
 
$
12

Other
 
—

 
2

 
2

 
—

 
—


(dollars in millions)
 
Non-Recurring Basis
 
as of December 31, 2012
 
 
Level 2
 
Level 3
 
Total
Assets:
 
 

 
 

 
 

Loans, notes and mortgages
 
$
1

 
$
221

 
$
222

Other
 
—

 
2

 
2

 
 
 
 
 
 
 
Fair Value Option
The following tables provide information about the line items in the Condensed Consolidated Statements of Loss where changes in fair values of assets and liabilities, for which the fair value option election has been made, are included for the three months ended March 31, 2013 and March 31, 2012.

(dollars in millions)
 
Changes in Fair Value For the Three Months Ended March 31, 2013, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
 
Changes in Fair Value For the Three Months Ended March 31, 2012, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
 
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
Assets:
 
 
 
 
 
 
 
 

 
 

 
 

Receivables under resale agreements
$
38

 
$
—

 
$
38

 
 
$
(34
)
 
$
—

 
$
(34
)
Investment securities
—

 
—

 
—

 
 
—

 
5

 
5

Loans
15

 
(56
)
 
(41
)
 
 
26

 
92

 
118

Other
—

 
3

 
3

 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
(20
)
 
—

 
(20
)
 
 
(34
)
 
—

 
(34
)
Short-term borrowings
(39
)
 
—

 
(39
)
 
 
7

 
—

 
7

Other payables — interest and other
—

 
13

 
13

 
 
—

 
49

 
49

Long-term borrowings
(932
)
 
—

 
(932
)
 
 
(2,433
)
 
—

 
(2,433
)
Schedule Of Fair Value Option Elections
The following tables present the difference between fair values and the aggregate contractual principal amounts of receivables under resale agreements, receivables under securities borrowed transactions, loans and long-term borrowings for which the fair value option election has been made as of March 31, 2013 and December 31, 2012.

(dollars in millions)
 
 
 
 
 
 
Fair Value at
 
Principal
Amount
Due Upon
Maturity
 
 
 
March 31, 2013
 
 
Difference
Assets:
 

 
 

 
 

Receivables under resale agreements
$
89,969

 
$
89,608

 
$
361

Receivables under securities borrowed transactions
1,282

 
1,272

 
10

Loans (1)
3,108

 
3,802

 
(694
)
Liabilities:
 
 
 
 
 
Long-term borrowings (2)
33,568

 
34,023

 
(455
)
(1) 
Includes trading loans with a fair value of $742 million and margin loans with a fair value of $273 million.
(2) 
The majority of the difference between the fair value and principal amount due upon maturity at March 31, 2013 relates to the impact of changes in Merrill Lynch's credit spreads, as well as the fair value of the embedded derivative, where applicable.
(dollars in millions)
 
 
 
 
 
 
Fair Value at
 
Principal
Amount
Due Upon
Maturity
 
 
 
December 31, 2012
 
 
Difference
Assets:
 

 
 

 
 

Receivables under resale agreements
$
93,715

 
$
93,433

 
$
282

Receivables under securities borrowed transactions
961

 
892

 
69

Loans (1)
4,063

 
4,835

 
(772
)
Liabilities:
 
 
 
 
 
Long-term borrowings(2)
30,875

 
32,151

 
(1,276
)
(1) 
Includes trading loans with a fair value of $715 million and margin loans with a fair value of $271 million.
(2) 
The difference between the fair value and principal amount due upon maturity at December 31, 2012 relates to the impact of changes in Merrill Lynch's credit spreads, as well as the fair value of the embedded derivative, where applicable.