Valuation techniques and inputs used in the fair value measurement of Level 3 assets and liabilities
The following tables present the Bank’s assets and liabilities recognized at fair value and classified as Level 3, together with the valuation
techniques used to measure fair value, the significant inputs used in the valuation technique that are considered unobservable, and a range of values for those unobservable inputs. The range of values represents the highest and lowest inputs used in calculating the fair value.
Valuation Techniques and Inputs Used in the Fair Value Measurement of Level 3 Assets and Liabilities1 As at October 31, 2016 Significant
Valuation technique
Government and government- related securities
Other debt securities Equity securities2
Market comparable Market comparable Market comparable
Discounted cash flow EBITDA multiple
Retained interests
Other financial assets designated at fair value through profit or loss
Derivatives Interest rate contracts
Foreign exchange contracts Credit contracts Equity contracts
Swaption model
Discounted cash flow Option model
Option model
Discounted cash flow Option model
Currency specific volatility Inflation rate swap curve Funding ratio
Currency specific volatility Credit spread
Price correlation Quanto correlation Dividend yield Equity volatility
Commodity contracts Trading deposits Option model Option model Swaption model
Other financial liabilities designated at fair value through profit or loss
Obligations related to securities sold short
1 2 Option model Market comparable
Certain comparative amounts have been reclassified to conform with the presentation adopted in the current period.
As at October 31, 2016, common shares exclude the fair value of Federal Reserve stock and Federal Home Loan Bank stock of $1.3 billion (October 31, 2015 – $1.3 billion) which are redeemable by the issuer at cost which approximates fair value. These securities cannot be traded in the market, hence, these securities have not been subjected to the sensitivity analysis. 3 Basis points.
4 Not applicable.
Quanto correlation Swaption correlation
Price correlation Quanto correlation Dividend yield Equity volatility
Currency specific volatility Funding ratio New issue price
28 1
55 9 7 3
(38) – 2
(66) 29
3
(38) – 7
28 2 100
264 2
75 14 40 95
17 10
116
(46) 41
95 17 10
116 264
72 100
17 1
75 8 7
10
(38) – 6
(45) 24
(23) (38) – 6
17 1 100
292 2
75 12 55 90
17 12 94
(25) 36
98 17 14
116 292
72 100
% % %
% bps3
% % % %
% %
% % % % %
% %
Market comparable Discounted cash flow
unobservable inputs (Level 3)
Bond price equivalent Bond price equivalent New issue price Earnings multiple
Price equivalent
Prepayment and liquidation rates Discount rates
Net asset value Market comparable Net asset value Bond price equivalent
Lower range
61 –
Discount rate
100 7
4.5 54
– 287
n/a4 99
Upper range
131 109 100 20.5
18 117 – 324
n/a4 100
Lower range
55 –
100 8
4.6 52
– 280 n/a4 100
Upper range
136 128 100
20 22
117 – 360 n/a4 101 points Unit
points points %
%
times %
% bps3 October 31, 2015
144 TD BANK GROUP ANNUAL REPORT 2016 FINANCIAL RESULTS
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