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Price Verification Policy Global Capital Markets

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Price Verification Policy Global Capital Markets DRAFT Price Verification Policy Global Capital Markets 2008 ! 1 FOIA CONFIDENTIAL TREATMENT REQUESTED LBH I_SEC07940 _2965994 BY LEHMAN BROTHERS HOLDINGS INC. 10 INTRODUCTION 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000004 1.1 BACKGROUNDoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo4 1.2 SCOPEoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo4 1.3 PROCESS 0VERVIEWoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo4 1.4 EXEMPTIONSoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo4 1.5 VALIDATION AND APPROVALooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo5 20 GAAP REQUIREMENTSooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo6 201 FAIR VALUE MEASUREMENT oo 000 000000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 000 000 6 202 OBSERVABLE AND UNOBSERVABLE PARAMETERSoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo6 203 TECHNICAL REFERENCES 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000 7 30 METHODOLOGY 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000008 301 SOURCES:ooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo8 302 MARK COMPARISON: 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000008 303 EXIT PRICEoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo8 304 LIQUIDITY/CONCENTRATION RESERVE 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000008 305 OTHER PRICE VALUATION ADJUSTMENTSoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo8 306 FREQUENCY 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000008 40 PRICE TESTINGTHRESHOLDSooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo10 VALUATION ADJUSTMENTS BY BPMO: FIXED INCOME (AMERICAS)oooooooooooooooooooooooooooooooooooooooooooooooo12 5o INTEREST RATES AMERICAS 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000012 5ol. CORE FIXED INCOME DERIVATIVES 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000013 5020 INTEREST RATE EXOTICS STRUCTURESooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo14 5o3o CM0Soooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo16 5.40 OTC BOND OPTIONS 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000016 5o 5o MORTGAGE OPTIONS 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000017 5o6o CVAoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo17 5o 70 MORTGAGE DERIVATIVES 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000017 60 FOREIGN EXCHANGE PRODUCTS AND FOREIGN EXCHANGE PROP PRODUCTSooooooooooooooooo17 6ol. FX AND FX PROP SPOT AND INTEREST RATE 00000000000000000000000000000000000000000000000000000000000000000000000000000000000017 6020 FX/FXPROP OPTION ATMAND SKEWVOLATILITYooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo18 6o3o CORRELATION TESTING ON FX CROSS CURRENCY PAIRS 0000000000000000000000000000000000000000000000000000000000000000019 70 GOVERNMENT AND LIQUID MARKET PROPRIETARY 0000000000000000000000000000000000000000000000000000000000000000019 701. TREASURIES, BONDS AND FUTURES 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000019 7020 DERIVATIVES IN GOVERNMENT AND LMPooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo19 80 COMMODITIESooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo20 90 REAL ESTATEooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo21 9ol. CMBS SECURITIES 000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000021 9020 REAL EST ATE DERIVATIVES 000 000 000000 000 000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 o 22 9o3o COMMERCIAL CONDillT LOANS & LARGE LOANS 0000000000000000000000000000000000000000000000000000000000000000000000000000024 9.40 COMMERCIAL N/R MEZZ- AND B-NOTES 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000026 9o5o REITLOCoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo27 9o6o REAL ESTATE SHORT POSITIONSooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo27 9070 PTG OVERVIEW 0000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000029 9o8o PRINCIPAL WHOLE LOANS (PTG)ooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo29 9o9o REAL EST ATE OWNED (PTG) o 000 000000 000 000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 000 oo 000 000 000 000 000 000 000 o 29 9o10o PRINCIPAL REAL ESTATE EQillTY PARTNERSHIP INTERESTS (PTG)ooooooooooooooooooooooooooooooooooooooooooooooooo30 9011. PTG (QUARTERLY)oooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo30 100 CREDIT 00000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000000034 1001. BANK LOANSoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo34 10020 CDSooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo36 10030 CDOoooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo38 10.40 HG, HY, & EMG CASHooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooooo40 2 FOIA CONFIDENTIAL TREATMENT REQUESTED LBH I_ SEC07940_2965995 BY LEHMAN BROTHERS HOLDINGS INC. 11. MORTGAGE AND MORTGAGE BACKED ...................................................................................... 42 11.1. WHOLE LOANS .................................................................................................................................. 49 11.2. PIPELINES .......................................................................................................................................... 54 11.3. PASS-THROUGHS ............................................................................................................................... 55 11.4. AGENCY CM0 ................................................................................................................................... 56 11.5. ABSREALESTATE ............................................................................................................................ 58 11.6. PRIME ................................................................................................................................................ 60 11.7. NoNPRIME ........................................................................................................................................ 63 11.8. NIM ................................................................................................................................................... 65 11.9. RESIDUALS ......................................................................................................................................... 67 11.1 0. TREASURIES .................................................................................................................................. 69 11.11. FUTURES ....................................................................................................................................... 69 11.12. SERVICING RIGHTS ......................................................................................................................
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