Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Location and Fair Values of Individual Derivative Instruments

The following tables summarize the location and fair values of individual derivative instruments reported in the Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011. Amounts are presented gross of the effect of offsetting balances even where a legal right of offset exists.

Fair Values of Derivative Instruments


	Derivative Asset			Derivative Liability
	Balance Sheet Location	Fair Value		Balance Sheet Location				Fair value
*September 30, 2012*
Derivatives held for trading
Credit derivatives	Derivative assets	$	—		Derivative liabilities			$	187,121
Interest rate swaps	Derivative assets		97,464		Derivative liabilities				432,581
	Derivative liabilities		166,345		Derivative assets				—
Currency swaps	Derivative assets		—		Derivative liabilities				—
Futures contracts	Derivative assets		—		Derivative liabilities				1,975
Other contracts	Derivative assets		—		Derivative liabilities				255

Total derivatives held for trading			263,809						621,932

Call options on long-term debt	Derivative assets		—		Derivative liabilities				—

Total non-VIE derivatives		$	263,809					$	621,932

Variable Interest Entities
Currency swaps	VIE—Derivative liabilities		—		VIE—Derivative liabilities				79,491
Interest rate swaps	VIE—Derivative liabilities		—		VIE—Derivative liabilities				1,981,460

Total VIE derivatives		$	—					$	2,060,951

*December 31, 2011:*
Derivatives held for trading
Credit derivatives	Derivative assets	$	—	Derivative liabilities		$	190,653
Interest rate swaps	Derivative assets		411,652	Derivative liabilities			251,303
	Derivative liabilities		30,859	Derivative assets			242,500
Currency swaps	Derivative assets		—	Derivative liabilities			2,423
Futures contracts	Derivative assets		—	Derivative liabilities			627
Other contracts	Derivative assets		—	Derivative liabilities			361

Total derivatives held for trading			442,511				687,867

Call options on long-term debt	Derivative assets		6,055	Derivative liabilities			—

Total non-VIE derivatives		$	448,566			$	687,867

Variable Interest Entities
Currency swaps	VIE—Derivative liabilities		27,779	VIE—Derivative liabilities			90,857
Interest rate swaps	VIE—Derivative liabilities		—	VIE—Derivative liabilities			2,023,974

Total VIE derivatives		$	27,779			$	2,114,831

Summary of Location and Amount of Gains and Losses of Derivative Contracts

The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income for the three and nine month periods ended September 30, 2012 and 2011, respectively:


	Location of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income	Amount of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income
		Three months ended September 30, 2012			Three months ended September 30, 2011
Financial Guarantee:
Credit derivatives	Net change in fair value of credit derivatives	$	27,440		$	4,505

Financial Services derivatives products:
Interest rate swaps	Derivative products		(33,036	)		(206,455	)
Currency swaps	Derivative products		570			372
Futures contracts	Derivative products		(3,485	)		(9,364	)
Other derivatives	Derivative products		(56	)		(328	)

Total Financial Services derivative products			(36,007	)		(215,775	)

Call options on long-term debt	Other (loss) income		—			(6,910	)

Variable Interest Entities:
Credit derivatives	Income on variable interest entities		—			—
Currency swaps	Income on variable interest entities		5,581			30,517
Interest rate swaps	Income on variable interest entities		(2,723	)		(475,288	)

Total Variable Interest Entities			2,858			(444,771	)

Total derivative contracts		$	(5,709	)	$	(662,951	)


	Location of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income	Amount of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income
		Nine months ended September 30, 2012			Nine months ended September 30, 2011
Financial Guarantee:
Credit derivatives	Net change in fair value of credit derivatives	$	12,803		$	19,889
Financial Services derivatives products:
Interest rate swaps	Derivative products		(99,026	)		(240,715	)
Currency swaps	Derivative products		807			(184	)
Futures contracts	Derivative products		(15,247	)		(19,239	)
Other derivatives	Derivative products		325			(228	)

Total Financial Services derivative products			(113,141	)		(260,366	)

Call options on long-term debt	Other (loss) income		(100,710	)		13,860

Variable Interest Entities:
Credit derivatives	Income on variable interest entities		—			(4,511	)
Currency swaps	Income on variable interest entities		(16,413	)		(7,848	)
Interest rate swaps	Income on variable interest entities		42,514			(563,809	)

Total Variable Interest Entities			26,101			(560,472	)

Total derivative contracts		$	(174,947	)	$	(787,089	)

Summary of Net Par Outstanding for CDS Contracts

than Ambac’s internal ratings. The following tables summarize the net par outstanding for CDS contracts, by Ambac rating, for each major category as of September 30, 2012 and December 31, 2011:


*September 30, 2012* Ambac Rating	CLO		Other		Total
AAA	$	217,833	$	524,866	$	742,699
AA		5,144,553		1,263,749		6,408,302
A		1,705,023		2,443,887		4,148,910
BBB⁽¹⁾		—		683,528		683,528
Below investment grade⁽²⁾		—		291,446		291,446

	$	7,067,409	$	5,207,476	$	12,274,885


*December 31, 2011* Ambac Rating	CLO		Other		Total
AAA	$	297,741	$	913,857	$	1,211,598
AA		6,193,522		1,248,584		7,442,106
A		1,737,314		2,967,445		4,704,759
BBB⁽¹⁾		—		518,142		518,142
Below investment grade⁽²⁾		—		290,007		290,007

	$	8,228,577	$	5,938,035	$	14,166,612

(1)

BBB internal rating reflects bonds which are of medium grade credit quality with adequate capacity to pay interest and repay principal. Certain protective elements and margins may weaken under adverse economic conditions and changing circumstances. These bonds are more likely than higher rated bonds to exhibit unreliable protection levels over all cycles.

(2)	Below investment grade (“BIG”) internal ratings reflect bonds which are of speculative grade credit quality with the adequacy of future margin levels for payment of interest and repayment of principal potentially adversely affected by major ongoing uncertainties or exposure to adverse conditions.

Summarize Information by Major Category of CDS Contracts

The tables below summarize information by major category as of September 30, 2012 and December 31, 2011:


	CLO			Other			Total
*September 30, 2012*
Number of CDS transactions		35			22			57
Remaining expected weighted-average life of obligations (in years)		2.1			5.5			3.5
Gross principal notional outstanding	$	7,067,409		$	5,207,476		$	12,274,885
Net derivative liabilities at fair value	$	(38,182	)	$	(148,939	)	$	(187,121	)

	CLO			Other			Total
*December 31, 2011*
Number of CDS transactions		44			24			68
Remaining expected weighted-average life of obligations (in years)		2.7			6.0			4.1
Gross principal notional outstanding	$	8,228,577		$	5,938,035		$	14,166,612
Net derivative liabilities at fair value	$	(54,320	)	$	(136,333	)	$	(190,653	)

Summary of Notional Amounts of AFS's Trading Derivative Products

As of September 30, 2012 and December 31, 2011 the notional amounts of AFS’s trading derivative products are as follows:


Type of derivative	Notional September 30, 2012		Notional December 31, 2011
Interest rate swaps—receive-fixed/pay-variable	$	968,168	$	1,370,995
Interest rate swaps—pay-fixed/receive-variable		1,745,806		3,798,305
Interest rate swaps—basis swaps		161,690		175,835
Currency swaps		—		13,559
Futures contracts		258,000		53,500
Other contracts		75,651		118,930

Summary of Notional for VIE Derivatives Outstanding

to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of September 30, 2012 and December 31, 2011 are as follows:


Type of VIE derivative	Notional September 30, 2012		Notional December 31, 2011
Interest rate swaps—receive-fixed/pay-variable	$	1,771,255	$	1,702,113
Interest rate swaps—pay-fixed/receive-variable		4,676,450		4,535,626
Currency swaps		750,463		721,168
Credit derivatives		20,747		20,934