Management’s discussion and analysis 78 JPMorgan Chase & Co. /2018 Form 10-K Treasury and CIO overview Treasury and CIO is predominantly responsible for measuring, monitoring, reporting and managing the Firm’s liquidity, funding, capital, structural interest rate and foreign exchange risks.
The risks managed by Treasury and CIO arise from the activities undertaken by the Firm’s four major reportable business segments to serve their respective client bases, which generate both on- and offbalance sheet assets and liabilities.
Treasury and CIO seek to achieve the Firm’s asset-liability management objectives generally by investing in highquality securities that are managed for the longer-term as part of the Firm’s investment securities portfolio.
Treasury and CIO also use derivatives to meet the Firm’s assetliability management objectives.
For further information on derivatives, refer to Note 5.
In addition, Treasury and CIO manage the Firm’s cash position primarily through depositing at central banks and investing in short-term instruments.
For further information on liquidity and funding risk, refer to Liquidity Risk Management on pages 95–100.
For information on interest rate, foreign exchange and other risks, refer to Market Risk Management on pages 124–131.
The investment securities portfolio primarily consists of agency and nonagency mortgage-backed securities, U. S.  and non-U.
S.  government securities, obligations of U. S.  states and municipalities, other ABS and corporate debt securities.
At December 31, 2018, the investment securities portfolio was $260.1 billion, and the average credit rating of the securities comprising the portfolio was AA+ (based upon external ratings where available and, where not available, based primarily upon internal ratings that correspond to ratings as defined by S&P and Moody’s).
Refer to Note 10 for further information on the Firm’s investment securities portfolio.
## Table 0 ##
As permitted by the new hedge accounting guidance, the Firm elected to transfer certain investment securities from HTM to AFS in the first quarter of 2018.
For additional information, refer to Notes 1 and 10.
ENTERPRISE-WIDE RISK MANAGEMENT Risk is an inherent part of JPMorgan Chase’s business activities.
When the Firm extends a consumer or wholesale loan, advises customers on their investment decisions, makes markets in securities, or offers other products or services, the Firm takes on some degree of risk.
The Firm’s overall objective is to manage its businesses, and the associated risks, in a manner that balances serving the interests of its clients, customers and investors and protects the safety and soundness of the Firm.
The Firm believes that effective risk management requires: Acceptance of responsibility, including identification and escalation of risk issues, by all individuals within the Firm; Ownership of risk identification, assessment, data and management within each of the lines of business and Corporate; and Firmwide structures for risk governance.
The Firm strives for continual improvement through efforts to enhance controls, ongoing employee training and development, talent retention, and other measures.
The Firm follows a disciplined and balanced compensation framework with strong internal governance and independent Board oversight.
The impact of risk and control issues are carefully considered in the Firm’s performance evaluation and incentive compensation processes.
Firmwide Risk Management is overseen and managed on an enterprise-wide basis.
The Firm’s risk management governance and oversight framework involves understanding drivers of risks, types of risks, and impacts of risks.
## Table 1 ##
Drivers of Risks Drivers of risks include, but are not limited to, the economic environment, regulatory or government policy, competitor or market evolution, business decisions, process or judgment error, deliberate wrongdoing, dysfunctional markets, and natural disasters.
Types of Risks The Firm’s risks are generally categorized in the following four risk types: Strategic risk is the risk associated with the Firm’s current and future business plans and objectives, including capital risk, liquidity risk, and the impact to the Firm’s reputation.
Credit and investment risk is the risk associated with the default or change in credit profile of a client, counterparty or customer; or loss of principal or a reduction in expected returns on investments, including consumer credit risk, wholesale credit risk, and investment portfolio risk.
Market risk is the risk associated with the effect of changes in market factors, such as interest and foreign exchange rates, equity and commodity prices, credit spreads or implied volatilities, on the value of assets and liabilities held for both the short and long term.
Operational risk is the risk associated with inadequate or failed internal processes, people and systems, or from external events and includes compliance risk, conduct risk, legal risk, and estimations and model risk.
Impacts of Risks There may be many consequences of risks manifesting, including quantitative impacts such as reduction in earnings and capital, liquidity outflows, and fines or penalties, or qualitative impacts, such as reputation damage, loss of clients, and regulatory and enforcement actions.
Governance and Oversight Functions The Firm manages its risk through risk governance and oversight functions.
The scope of a particular function may include one or more drivers, types and/or impacts of risk.
For example, Country Risk Management oversees country risk which may be a driver of risk or an aggregation of exposures that could give rise to multiple risk types such as credit or market risk.
The following sections discusses the risk governance and oversight functions in place to manage the risks inherent in the Firms business activities.
Management’s discussion and analysis 118 JPMorgan Chase & Co. /2018 Form 10-K equivalent to the risk of loan exposures.
DRE is a less extreme measure of potential credit loss than Peak and is used as an input for aggregating derivative credit risk exposures with loans and other credit risk.
Finally, AVG is a measure of the expected fair value of the Firm’s derivative receivables at future time periods, including the benefit of collateral.
AVG over the total life of the derivative contract is used as the primary metric for pricing purposes and is used to calculate credit risk capital and the CVA, as further described below.
The fair value of the Firm’s derivative receivables incorporates CVA to reflect the credit quality of counterparties.
CVA is based on the Firm’s AVG to a counterparty and the counterparty’s credit spread in the credit derivatives market.
The Firm believes that active risk management is essential to controlling the dynamic credit risk in the derivatives portfolio.
In addition, the Firm’s risk management process takes into consideration the potential impact of wrong-way risk, which is broadly defined as the potential for increased correlation between the Firm’s exposure to a counterparty (AVG) and the counterparty’s credit quality.
Many factors may influence the nature and magnitude of these correlations over time.
To the extent that these correlations are identified, the Firm may adjust the CVA associated with that counterparty’s AVG.
The Firm risk manages exposure to changes in CVA by entering into credit derivative contracts, as well as interest rate, foreign exchange, equity and commodity derivative contracts.
The accompanying graph shows exposure profiles to the Firm’s current derivatives portfolio over the next 10 years as calculated by the Peak, DRE and AVG metrics.
The three measures generally show that exposure will decline after the first year, if no new trades are added to the portfolio.
Exposure profile of derivatives measures December 31, 2018 (in billions)
## Table 2 ##
The following table summarizes the ratings profile of the Firm’s derivative receivables, including credit derivatives, net of all collateral, at the dates indicated.
The ratings scale is based on the Firm’s internal ratings, which generally correspond to the ratings as assigned by S&P and Moody’s.
Ratings profile of derivative receivables
As previously noted, the Firm uses collateral agreements to mitigate counterparty credit risk.
The percentage of the Firm’s over-the-counter derivative transactions subject to collateral agreements — excluding foreign exchange spot trades, which are not typically covered by collateral agreements due to their short maturity and centrally cleared trades that are settled daily — was approximately 90% at both December 31, 2018, and December 31, 2017.
Notes to consolidated financial statements 180 JPMorgan Chase & Co. /2018 Form 10-K Changes in fair value under the fair value option election The following table presents the changes in fair value included in the Consolidated statements of income for the years ended December 31, 2018, 2017 and 2016, for items for which the fair value option was elected.
The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table.
## Table 3 ##
(a) Unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected is recorded in OCI, while realized gains/(losses) are recorded in principal transactions revenue.
Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were not material for the years ended December 31, 2018, 2017 and 2016.
(b) Long-term debt measured at fair value predominantly relates to structured notes.
Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk.
(c) Reported in mortgage fees and related income.
(d) Reported in other income.
(e) Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than hybrid financial instruments.
For further information regarding interest income and interest expense, refer to Note 7.
Determination of instrument-specific credit risk for items for which a fair value election was made The following describes how the gains and losses that are attributable to changes in instrument-specific credit risk, were determined.  ?
Loans and lending-related commitments: For floating- rate instruments, all changes in value are attributed to instrument-specific credit risk.
For fixed-rate instruments, an allocation of the changes in value for the period is made between those changes in value that are interest rate-related and changes in value that are credit-related.
Allocations are generally based on an analysis of borrower-specific credit spread and recovery information, where available, or benchmarking to similar entities or industries.  ?
Long-term debt: Changes in value attributable to instrument-specific credit risk were derived principally from observable changes in the Firm’s credit spread as observed in the bond market.  ?
Securities financing agreements: Generally, for these types of agreements, there is a requirement that collateral be maintained with a market value equal to or in excess of the principal amount loaned; as a result, there would be no adjustment or an immaterial adjustment for instrument-specific credit risk related to these agreements.

<table><tr><td>As of or for the year ended December 31, (in millions)</td><td>2018</td><td>2017</td><td>2016</td></tr><tr><td>Investment securities gains/(losses)</td><td>$-395</td><td>$-78</td><td>$132</td></tr><tr><td>Available-for-sale (“AFS”) investment securities (average)</td><td>203,449</td><td>219,345</td><td>226,892</td></tr><tr><td>Held-to-maturity (“HTM”) investment securities (average)</td><td>31,747</td><td>47,927</td><td>51,358</td></tr><tr><td>Investment securities portfolio (average)</td><td>235,197</td><td>267,272</td><td>278,250</td></tr><tr><td>AFS investment securities (period-end)</td><td>228,681</td><td>200,247</td><td>236,670</td></tr><tr><td>HTM investment securities (period-end)</td><td>31,434</td><td>47,733</td><td>50,168</td></tr><tr><td>Investment securities portfolio (period–end)</td><td>260,115</td><td>247,980</td><td>286,838</td></tr></table>
<table><tr><td>Risk governance and oversight functions</td><td>Page</td></tr><tr><td>Strategic risk</td><td>84</td></tr><tr><td>Capital risk</td><td>85–94</td></tr><tr><td>Liquidity risk</td><td>95–100</td></tr><tr><td>Reputation risk</td><td>101</td></tr><tr><td>Consumer credit risk</td><td>106-111</td></tr><tr><td>Wholesale credit risk</td><td>112-119</td></tr><tr><td>Investment portfolio risk</td><td>123</td></tr><tr><td>Market risk</td><td>124-131</td></tr><tr><td>Country risk</td><td>132–133</td></tr><tr><td>Operational risk</td><td>134-136</td></tr><tr><td>Compliance risk</td><td>137</td></tr><tr><td>Conduct risk</td><td>138</td></tr><tr><td>Legal risk</td><td>139</td></tr><tr><td>Estimations and Model risk</td><td>140</td></tr></table>
<table><tr><td>Rating equivalent</td><td>2018</td><td>2017</td></tr><tr><td>December 31,(in millions, except ratios)</td><td>Exposure net of all collateral</td><td>% of exposure netof all collateral</td><td>Exposure net of all collateral</td><td>% of exposure netof all collateral</td></tr><tr><td>AAA/Aaa to AA-/Aa3</td><td>$11,831</td><td>31%</td><td>$11,529</td><td>29%</td></tr><tr><td>A+/A1 to A-/A3</td><td>7,428</td><td>19</td><td>6,919</td><td>17</td></tr><tr><td>BBB+/Baa1 to BBB-/Baa3</td><td>12,536</td><td>32</td><td>13,925</td><td>34</td></tr><tr><td>BB+/Ba1 to B-/B3</td><td>6,373</td><td>16</td><td>7,397</td><td>18</td></tr><tr><td>CCC+/Caa1 and below</td><td>723</td><td>2</td><td>645</td><td>2</td></tr><tr><td>Total</td><td>$38,891</td><td>100%</td><td>$40,415</td><td>100%</td></tr></table>
<table><tr><td></td><td colspan="4">2018</td><td colspan="4">2017</td><td colspan="4">2016</td></tr><tr><td>December 31, (in millions)</td><td>Principal transactions</td><td colspan="2">All other income</td><td>Total changes in fair value recorded<sup>(e)</sup></td><td>Principal transactions</td><td colspan="2">All other income</td><td>Total changes in fair value recorded<sup>(e)</sup></td><td>Principal transactions</td><td colspan="2">All other income</td><td>Total changes in fair value recorded<sup>(e)</sup></td></tr><tr><td>Federal funds sold and securities purchased under resale agreements</td><td>$- 35</td><td>$—</td><td></td><td>$- 35</td><td>$- 97</td><td>$—</td><td></td><td>$- 97</td><td>$- 76</td><td>$—</td><td></td><td>$- 76</td></tr><tr><td>Securities borrowed</td><td>22</td><td>—</td><td></td><td>22</td><td>50</td><td>—</td><td></td><td>50</td><td>1</td><td>—</td><td></td><td>1</td></tr><tr><td>Trading assets:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Debt and equity instruments, excluding loans</td><td>- 1,680</td><td>1</td><td><sup>(c)</sup></td><td>- 1,679</td><td>1,943</td><td>2</td><td><sup>(c)</sup></td><td>1,945</td><td>120</td><td>- 1</td><td><sup>(c)</sup></td><td>119</td></tr><tr><td>Loans reported as tradingassets:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Changes in instrument-specific credit risk</td><td>414</td><td>1</td><td><sup>(c)</sup></td><td>415</td><td>330</td><td>14</td><td><sup>(c)</sup></td><td>344</td><td>461</td><td>43</td><td><sup>(c)</sup></td><td>504</td></tr><tr><td>Other changes in fair value</td><td>160</td><td>185</td><td><sup>(c)</sup></td><td>345</td><td>217</td><td>747</td><td><sup>(c)</sup></td><td>964</td><td>79</td><td>684</td><td><sup>(c)</sup></td><td>763</td></tr><tr><td>Loans:</td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Changes in instrument-specific credit risk</td><td>- 1</td><td>—</td><td></td><td>- 1</td><td>- 1</td><td>—</td><td></td><td>- 1</td><td>13</td><td>—</td><td></td><td>13</td></tr><tr><td>Other changes in fair value</td><td>- 1</td><td>—</td><td></td><td>- 1</td><td>- 12</td><td>3</td><td><sup>(c)</sup></td><td>- 9</td><td>- 7</td><td>—</td><td></td><td>- 7</td></tr><tr><td>Other assets</td><td>5</td><td>- 45</td><td><sup>(d)</sup></td><td>- 40</td><td>11</td><td>- 55</td><td><sup>(d)</sup></td><td>- 44</td><td>20</td><td>62</td><td><sup>(d)</sup></td><td>82</td></tr><tr><td>Deposits<sup>(a)</sup></td><td>181</td><td>—</td><td></td><td>181</td><td>- 533</td><td>—</td><td></td><td>- 533</td><td>- 134</td><td>—</td><td></td><td>- 134</td></tr><tr><td>Federal funds purchased and securities loaned or sold under repurchase agreements</td><td>11</td><td>—</td><td></td><td>11</td><td>11</td><td>—</td><td></td><td>11</td><td>19</td><td>—</td><td></td><td>19</td></tr><tr><td>Short-term borrowings<sup>(a)</sup></td><td>862</td><td>—</td><td></td><td>862</td><td>- 747</td><td>—</td><td></td><td>- 747</td><td>- 236</td><td>—</td><td></td><td>- 236</td></tr><tr><td>Trading liabilities</td><td>1</td><td>—</td><td></td><td>1</td><td>- 1</td><td>—</td><td></td><td>- 1</td><td>6</td><td>—</td><td></td><td>6</td></tr><tr><td>Beneficial interests issued by consolidated VIEs</td><td>—</td><td>—</td><td></td><td>—</td><td>—</td><td>—</td><td></td><td>—</td><td>23</td><td>—</td><td></td><td>23</td></tr><tr><td>Long-term debt<sup>(a)(b)</sup></td><td>2,695</td><td>—</td><td></td><td>2,695</td><td>- 2,022</td><td>—</td><td></td><td>- 2,022</td><td>- 773</td><td>—</td><td></td><td>- 773</td></tr></table>

Question: As of December 31,what year is the Short-term borrowings for Principal transactions the lowest?
Answer: 2017