-7-
iii. OCC’s Position................ 87
iv. Methods Used To Calculate...... 87
3. Market Data for Pricing Credit Risk of
Bonds..................................... 88
D. Other Adjustments.............................. 89
1. Investing and Funding Costs............... 89
2. Closeout Costs (Liquidity)................ 90
3. Dealer Margin............................. 90
V. Los Alamos Project............................... 91
VI. FNBC’s Swaps Business............................ 93
A. Overview....................................... 93
B. Trading Desks.................................. 94
C. Swaps Operations Personnel..................... 95
1. Overview.................................. 95
2. Traders................................... 96
a. Function............................. 96
b. Number Employed in Chicago........... 97
c. Practice as to Quotations............ 97
d. Risk Management Responsibility....... 98
3. Marketers................................. 99
a. Function............................. 99
b. Practice as to Quotations............100
4. Relationship Managers.....................100
5. Credit Officers...........................101
D. Weak Credit Rating.............................101
E. Quoting a Price................................102
F. Buyouts........................................103
G. Swaps Outstanding at Yearend...................104
H. Swaps in Issue.................................104
VII. FNBC’s Financial Accounting Practice.............106
VIII. FNBC’s Practice as to Its Valuation of Its Swaps.106
A. Financial Reporting Position...................106
B. Uses of Valuation..............................107
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Last modified: May 25, 2011