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DERIVATIVE FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2015
DERIVATIVE FINANCIAL INSTRUMENTS |
6. | DERIVATIVE FINANCIAL INSTRUMENTS
Blackstone and the consolidated Blackstone Funds enter into derivative contracts in the normal course of business to achieve certain risk management objectives and for general investment purposes. Blackstone may enter into derivative contracts in order to hedge its interest rate risk exposure against the effects of interest rate changes. Additionally, Blackstone may also enter into derivative contracts in order to hedge its foreign currency risk exposure against the effects of a portion of its non-U.S. dollar denominated currency net investments. As a result of the use of derivative contracts, Blackstone and the consolidated Blackstone Funds are exposed to the risk that counterparties will fail to fulfill their contractual obligations. To mitigate such counterparty risk, Blackstone and the consolidated Blackstone Funds enter into contracts with certain major financial institutions, all of which have investment grade ratings. Counterparty credit risk is evaluated in determining the fair value of derivative instruments. Net Investment Hedges To manage the potential exposure from adverse changes in currency exchange rates arising from Blackstone’s net investment in foreign operations, during December 2014, Blackstone entered into several foreign currency forward contracts to hedge a portion of the net investment in Blackstone’s non-U.S. dollar denominated foreign operations. Blackstone uses foreign currency forward contracts to hedge portions of Blackstone’s net investments in foreign operations. The gains and losses due to change in fair value attributable to changes in spot exchange rates on foreign currency derivatives designated as net investment hedges were recognized in Other Comprehensive Income (Loss), Net of Tax — Currency Translation Adjustment. For the three months ended September 30, 2015 the resulting loss was $0.1 million. For the nine months ended September 30, 2015, the resulting gain was $5.2 million. Freestanding Derivatives Freestanding derivatives are instruments that Blackstone and certain of the consolidated Blackstone Funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include interest rate swaps, foreign exchange contracts, equity swaps, options, futures and other derivative contracts. The table below summarizes the aggregate notional amount and fair value of the derivative financial instruments. The notional amount represents the absolute value amount of all outstanding derivative contracts.
|  | September 30, 2015 |  |  | December 31, 2014 |
|  | Assets |  |  | Liabilities |  |  | Assets |  |  | Liabilities |
|  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |  |  | Notional |  |  | Fair Value |
Net Investment Hedges |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Contracts |  | $ | 140 |  |  | $ | — |  |  | $ | 56,008 |  |  | $ | 244 |  |  | $ | 62,078 |  |  | $ | 523 |  |  | $ | — |  |  | $ | — |
Freestanding Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Blackstone — Other Interest Rate Contracts |  |  | 1,510,139 |  |  |  | 1,260 |  |  |  | 1,557,240 |  |  |  | 11,834 |  |  |  | 223,886 |  |  |  | 407 |  |  |  | 879,412 |  |  |  | 4,590 |
Foreign Currency Contracts |  |  | 181,335 |  |  |  | 2,443 |  |  |  | 210,855 |  |  |  | 1,849 |  |  |  | 192,163 |  |  |  | 2,798 |  |  |  | 148,873 |  |  |  | 681 |
Credit Default Swaps |  |  | — |  |  |  | — |  |  |  | 74,000 |  |  |  | 6,413 |  |  |  | 19,500 |  |  |  | 85 |  |  |  | 56,000 |  |  |  | 868 |
Investments of Consolidated Blackstone Funds |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Contracts |  |  | 97,169 |  |  |  | 2,345 |  |  |  | 107,632 |  |  |  | 5,975 |  |  |  | 199,364 |  |  |  | 8,915 |  |  |  | 250,244 |  |  |  | 21,875 |
Interest Rate Contracts |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,659 |  |  |  | 2,281 |  |  |  | — |  |  |  | — |
Credit Default Swaps |  |  | — |  |  |  | — |  |  |  | 87,088 |  |  |  | 4,454 |  |  |  | — |  |  |  | — |  |  |  | 91,372 |  |  |  | 2,514 |
|  |  | 1,788,643 |  |  |  | 6,048 |  |  |  | 2,036,815 |  |  |  | 30,525 |  |  |  | 657,572 |  |  |  | 14,486 |  |  |  | 1,425,901 |  |  |  | 30,528 |
Total |  | $ | 1,788,783 |  |  | $ | 6,048 |  |  | $ | 2,092,823 |  |  | $ | 30,769 |  |  | $ | 719,650 |  |  | $ | 15,009 |  |  | $ | 1,425,901 |  |  | $ | 30,528 |
The table below summarizes the impact to the Condensed Consolidated Statements of Operations from derivative financial instruments:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2015 |  |  | 2014 |  |  | 2015 |  |  | 2014 |
Net Investment Hedges — Foreign Currency Contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedge Ineffectiveness |  | $ | — |  |  | $ | — |  |  | $ | 229 |  |  | $ | — |
Freestanding Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Realized Gains (Losses) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Contracts |  | $ | (2,076 | ) |  | $ | 2,482 |  |  | $ | (7,169 | ) |  | $ | 1,079 |
Foreign Currency Contracts |  |  | 53 |  |  |  | 4,327 |  |  |  | 8,956 |  |  |  | 1,346 |
Credit Default Swaps |  |  | 646 |  |  |  | 763 |  |  |  | 4,427 |  |  |  | 2,045 |
Total |  | $ | (1,377 | ) |  | $ | 7,572 |  |  | $ | 6,214 |  |  | $ | 4,470 |
Freestanding Derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net Change in Unrealized Gains (Losses) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Contracts |  | $ | (7,282 | ) |  | $ | (111 | ) |  | $ | (3,321 | ) |  | $ | (4,384 | )
Foreign Currency Contracts |  |  | 1,796 |  |  |  | (5,253 | ) |  |  | (6,449 | ) |  |  | (27,197 | )
Credit Default Swaps |  |  | (3,319 | ) |  |  | (1,060 | ) |  |  | (8,710 | ) |  |  | 3,738 |
Total |  | $ | (8,805 | ) |  | $ | (6,424 | ) |  | $ | (18,480 | ) |  | $ | (27,843 | )
As of September 30, 2015 and December 31, 2014, the Partnership had not designated any derivatives as cash flow hedges.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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