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Table 31 Asset and Liability Management Interest Rate and Foreign Exchange Contracts
December 31, 2007
Fair
Value
Expected Maturity
Average Estimated
Duration
(Dollars in millions, average estimated duration in
years) Total 2008 2009 2010 2011 2012 Thereafter
Receive fixed interest rate swaps
(1, 2)
$ 992 3.70
Notional amount
$ 81,965 $ 4,869 $48,908 $ 3,252 $1,630 $2,508 $20,798
Weighted average fixed rate
4.34% 4.03% 3.91% 4.35% 4.50% 4.88% 5.34%
Pay fixed interest rate swaps
(1)
(429) 5.37
Notional amount
$ 11,340 $ – $ – $ – $ – $1,000 $10,340
Weighted average fixed rate
5.04% –% –% –% –% 5.45% 5.00%
Foreign exchange basis swaps
(2, 3, 4)
6,164
Notional amount
$ 54,531 $ 2,537 $ 4,463 $ 5,839 $4,294 $8,695 $28,703
Option products
(5)
(155)
Notional amount
140,114 130,000 10,000 76 – – 38
Foreign exchange contracts
(2, 4, 6)
(499)
Notional amount
(7)
31,054 1,438 2,047 4,171 1,235 3,150 19,013
Futures and forward rate contracts
(3)
Notional amount
(7)
752 752 – – – – –
Net ALM contracts
$6,070
December 31, 2006
Fair
Value
Expected Maturity
(Dollars in millions, average estimated duration in
years) Total 2007 2008 2009 2010 2011 Thereafter
Average Estimated
Duration
Receive fixed interest rate swaps
(1, 2)
$ (748) 4.42
Notional amount $ 91,502 $ 2,795 $ 7,844 $48,900 $3,252 $1,630 $27,081
Weighted average fixed rate 4.90% 4.80% 4.41% 4.90% 4.35% 4.50% 5.14%
Pay fixed interest rate swaps
(1)
261 2.93
Notional amount $100,217 $ 15,000 $ 2,500 $44,000 $ – $ 250 $38,467
Weighted average fixed rate 4.98% 5.12% 5.11% 4.86% –% 5.43% 5.06%
Foreign exchange basis swaps
(2, 3, 4)
1,992
Notional amount $ 31,916 $ 174 $ 2,292 $ 3,012 $5,351 $3,962 $17,125
Option products
(5)
317
Notional amount 243,280 200,000 43,176 – 70 – 34
Foreign exchange contracts
(2, 4, 6)
(319)
Notional amount
(7)
20,319 (753) 1,588 1,901 3,850 1,104 12,629
Futures and forward rate contracts (46)
Notional amount
(7)
8,480 8,480 – – – – –
Net ALM contracts $1,457
(1) At December 31, 2007, $45.0 billion of the receive fixed interest rate swap notional represented forward starting swaps that will not be effective until their respective contractual start dates. There were no forward starting pay
fixed swap positions at December 31, 2007. At December 31, 2006, $4.2 billion of the receive fixed and $52.5 billion of the pay fixed swap notional represented forward starting swaps that will not be effective until their
respective contractual start dates.
(2) Does not include basis adjustments on fixed rate debt issued by the Corporation and hedged under fair value hedge relationships pursuant to SFAS 133 that substantially offset the fair values of these derivatives.
(3) Foreign exchange basis swaps consist of cross-currency variable interest rate swaps used separately or in conjunction with receive fixed interest rate swaps.
(4) Does not include foreign currency translation adjustments on certain foreign debt issued by the Corporation which substantially offset the fair values of these derivatives.
(5) Option products of $140.1 billion at December 31, 2007 are comprised of $120.1 billion in purchased caps and $20.0 billion in sold floors. At December 31, 2006, option products included $225.1 billion in caps and $18.2
billion in swaptions.
(6) Foreign exchange contracts include foreign-denominated and cross-currency receive fixed interest rate swaps as well as foreign currency forward rate contracts. Total notional was comprised of $31.3 billion in foreign-
denominated and cross-currency receive fixed swaps and $211 million in foreign currency forward rate contracts at December 31, 2007 and $21.0 billion in foreign-denominated and cross-currency receive fixed swaps and
$697 million in foreign currency forward rate contracts at December 31, 2006.
(7) Reflects the net of long and short positions.
The table above includes derivatives utilized in our ALM activities,
including those designated as SFAS 133 accounting hedges and economic
hedges. The fair value of net ALM contracts increased $4.6 billion from a
gain of $1.5 billion at December 31, 2006 to a gain of $6.1 billion at
December 31, 2007. The increase was primarily attributable to gains from
changes in the value of foreign exchange basis swaps of $4.2 billion, and
U.S. dollar denominated receive fixed interest rate swaps of $1.7 billion.
These gains were partially offset by losses from changes in the value of
pay fixed interest rate swaps of $690 million, option products of $472
million, and foreign exchange contracts of $180 million. The increase in
the value of foreign exchange basis swaps was due to the strengthening of
most foreign currencies against the U.S. dollar during the twelve months
ended December 31, 2007. The increase in the value of U.S. dollar
denominated receive fixed interest rate swaps and the decrease in the
value of the pay fixed interest rate swaps were due to decreases in inter-
est rates during 2007. The decrease in the value of the option portfolio
was primarily attributable to decreases in interest rates during 2007, net
terminations and expirations of caps and floors, and terminations of swap-
tions. The decrease in the value of foreign exchange contracts was largely
due to the increase in foreign interest rates during 2007.
The Corporation uses interest rate derivative instruments to hedge
the variability in the cash flows of its assets and liabilities, and other fore-
casted transactions (cash flow hedges). From time to time, the Corpo-
ration also utilizes equity-indexed derivatives accounted for as SFAS 133
cash flow hedges to minimize exposure to price fluctuations on the fore-
casted purchase or sale of certain equity investments. The net losses
on both open and terminated derivative instruments recorded in accumu-
lated OCI, net-of-tax, was $4.4 billion at December 31, 2007. These net
losses are expected to be reclassified into earnings in the same period
when the hedged cash flows affect earnings and will decrease income or
increase expense on the respective hedged cash flows. Assuming no
change in open cash flow derivative hedge positions and no changes to
92
Bank of America 2007