(Note 1) |
Description of the valuation techniques and inputs used to measure fair value |
Monetary claims bought
The fair value of
monetary claims bought is determined using prices obtained from third-party vendors (broker-dealers, etc.) or the prices estimated based on internal models.
With respect to some securitized products backed by general corporate loans, the fair value is measured by considering the estimated fair value
amounts determined using projected cash flows through an analysis of the underlying loans, probability of default, prepayment rates, etc. and discounting the projected cash flows using discount rates reflecting the liquidity premium based on
historical market data and the prices obtained from independent broker-dealers. These products are classified into Level 3.
For other
securitized products, the fair value is determined based on the prices obtained from independent third parties after considering the results of periodic confirmation of the current status of these products, including price comparison with similar
products, time series data comparison of the same product, and analysis of consistency with publicly available market indices. These products are classified into Level 2 or Level 3 depending on the inputs used for the prices obtained from
independent third parties.
For certain monetary claims bought for which these methods do not apply, the fair value is measured based on
either the present value using projected future cash flows through an analysis of prepayment rates, etc., and discounting the project cash flows at the market interest rates as of the valuation date with certain adjustments, or is the carrying
amount if their fair value approximates such carrying amount from their qualitative viewpoint. If these monetary claims bought are measured at present value, these monetary claims bought are classified into Level 2 or, if they are short-term
and their fair value approximates the carrying amount, then the carrying amount is presented as their fair value, and they are classified into Level 3.
Trading assets and liabilities
Securities such as bonds that are held for trading purposes are classified as Level 1 if prices quoted by stock exchanges are available in
an active market, and as Level 2 if the fair value is determined based on either the present value of the expected future cash flows discounted at an interest rate based on the market interest rates as of the date of evaluation with certain
adjustments or prices quoted by the financial institutions from which these securities are purchased.
Money held in trust
For securities that are part of trust property in an independently managed monetary trust with the primary purpose to manage securities, the
fair value is determined based on the prices quoted by the financial institutions from which these securities are purchased, and these securities are classified into Level 2 depending on the fair value hierarchy of the component assets.
See Money Held in Trust for notes on money held in trust by category based on each purpose of holding the money held in trust.
Securities
The fair value of equity
securities is determined based on the prices quoted by stock exchanges and equity securities are primarily classified into Level 1 as the quoted prices are available in active markets. The fair value of bonds is determined based on the market
price or the price quoted by the financial institutions from which they are purchased or based on the price reasonably calculated using internal models. Government bonds are primarily classified into Level 1, other bonds are primarily
classified into Level 2, and foreign equity securities with maturity as well as preferred securities included in Other securities are primarily classified into Level 3.
For privately placed guaranteed bonds held by MUFGs bank subsidiaries, the fair value is determined based on the present value of
expected future cash flows, which are adjusted to reflect credit risk, the amounts expected to be collected from collateral and guarantees and guarantee fees, and discounted at an interest rate based on the market interest rates as of the date of
evaluation with certain adjustments. These bonds are classified into Level 2 depending on credit risk, etc.
The fair value of
investment trusts is determined based on the closing market price or other publicly available net asset value. Listed investment trusts and listed real estate investment trusts, which have closing market prices, are primarily classified into
Level 1, and other investment trusts are primarily classified into Level 2. Investment trusts which are accounted for at net asset value in accordance with Paragraphs 24-3 and 24-9 of the Implementation Guidance on Fair Value Measurement are not classified into any fair value hierarchy.
See Securities for notes on securities by category based on each purpose of holding the securities.
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