Bank One Corporation - Page 231

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          of the relevant years, and it did not prescribe specific methods            
          for arriving at fair value.                                                 
                         d.  SFAS No. 133                                             
               In June 1998, the FASB issued SFAS No. 133, “Accounting for            
          Derivative Instruments and Hedging Activities”.  SFAS No. 133               
          required non-hedging derivative instruments such as swaps to be             
          reported at fair value on the balance sheet, with gains and                 
          losses included in current earnings.  SFAS No. 133 was not                  
          effective for any of the relevant years, and it did not prescribe           
          specific methods for arriving at fair value.                                
               G.  Methods of Valuing Swaps                                           
               During the relevant years, the three main methods which                
          dealers used to value their swaps portfolios were the bid-ask               
          method, the midmarket method, and the adjusted midmarket method.            
                    1.  Bid-Ask Method                                                
               The bid-ask method was essentially a market comparables                
          approach to valuation.  Some dealers used this method, and it was           
          recognized as a valid method by the Group of Thirty (G-30)                  
          (discussed infra p. 76) and the OCC.  Under the bid-ask method,             
          each swap generally was valued by (1) identifying the generic               
          swap to which it was most comparable, (2) ascertaining the bid or           
          ask price for that generic swap, and (3) adjusting the                      
          ascertained price to reflect any differences between the generic            
          swap and the swap being valued.  Bid prices were used to value a            






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