Bank of America 2013 Annual Report Download - page 265

Bank of America 2013 263
Quantitative Information about Level 3 Fair Value Measurements for Loans, Securities and Structured Liabilities at December 31, 2012
(Dollars in millions) Inputs (1)
Financial Instrument
Fair
Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted
Average
Loans and Securities (2)
Instruments backed by residential real estate assets $ 4,478
Discounted cash flow,
Market comparables
Yield 2% to 25% 6%
Trading account assets – Mortgage trading loans and ABS 459 Prepayment speed 1% to 30% CPR 10%
Loans and leases 1,286 Default rate 0% to 44% CDR 6%
Loans held-for-sale 2,733 Loss severity 6% to 85% 43%
Instruments backed by commercial real estate assets $ 1,910 Discounted cash flow Yield 5% n/a
Other assets 1,910 Loss severity 51% to 100% 88%
Commercial loans, debt securities and other $ 10,778
Discounted cash flow,
Market comparables
Yield 0% to 25% 4%
Trading account assets – Corporate securities, trading loans and other 2,289 Enterprise value/EBITDA multiple 2x to 11x 5x
Trading account assets – Mortgage trading loans and ABS 4,476 Prepayment speed 5% to 30% 20%
AFS debt securities – Other taxable securities 3,012 Default rate 1% to 5% 4%
Loans and leases 1,001 Loss severity 25% to 40% 35%
Auction rate securities $ 3,414
Discounted cash flow,
Market comparables
Discount rate 4% to 5% 4%
Trading account assets – Corporate securities, trading loans and other 1,437 Projected tender price/
Refinancing level
50% to 100% 92%
AFS debt securities – Other taxable securities 916
AFS debt securities – Tax-exempt securities 1,061
Structured liabilities
Long-term debt $ (2,301) Industry standard
derivative pricing (3)
Equity correlation 30% to 97% n/m
Long-dated volatilities 20% to 70% n/m
Quantitative Information about Level 3 Fair Value Measurements for Net Derivative Assets at December 31, 2012
(Dollars in millions) Inputs (1)
Financial Instrument
Fair
Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Net derivatives assets
Credit derivatives $ 2,327
Discounted cash flow,
Stochastic recovery
correlation model
Yield 2% to 25%
Credit spreads 58 bps to 615 bps
Upfront points 25 points to 99 points
Spread to index -2,080 bps to 1,972 bps
Credit correlation 19% to 75%
Prepayment speed 3% to 30% CPR
Default rate 0% to 8% CDR
Loss severity 25% to 42%
Equity derivatives $ (1,295) Industry standard
derivative pricing (3)
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 $ 441
Industry standard
derivative pricing (4)
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 assets $ 1,468
(1) At December 31, 2012, weighted averages were disclosed for all loans and securities. For more information on the ranges of inputs for significant unobservable inputs for structured liabilities and
net derivative assets, see the qualitative discussion on page 264.
(2) The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 257: Trading
account assets – Corporate securities, trading loans and other of $3.7 billion, Trading account assets – Mortgage trading loans and ABS of $4.9 billion, AFS debt securities – Other taxable securities
of $3.9 billion, AFS debt securities – Tax-exempt securities of $1.1 billion, Loans and leases of $2.3 billion, LHFS of $2.7 billion and Other assets of $1.9 billion.
(3) Includes models such as Monte Carlo simulation and Black-Scholes.
(4) Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
n/a = not applicable
n/m = not meaningful
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
EBITDA = Earnings before interest, taxes, depreciation and amortization
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange