Balance Sheet at 31 December 2010 of BBVA

Translation of financial statements originally issued in Spanish and prepared in accordance with generally accounting principles Spain (See Note 1 and 54). In the event of a discrepancy, the Spanishlanguage
version prevails.
Financial Instruments
LEVEL 2
Valuation techniques Main assumptions Main inputs used
2010
Fair value (Millions of Euros)
Trading portfolio
• Debt securities
Present-value method.
Calculation of the present value of financial instruments as the current value of future
cash flows (discounted at market interest rates), taking into account:
• Estimate of prepayment rates;
• Risk premiums.
• Observable market
interest rates.
Debt securities 898
Equity instruments 15
Available-for-sale financial assets
• Equity instruments
• Issuer credit risk; and
• Current market interest rates.
• Net Asset Value (NAV) published recurrently, but not every quarter
Debt securities 2,717
Equity instruments 26
Analytic/Semi-analytic Formulae
For share, currency, inflation or commodity derivatives:
• Black-Scholes assumptions take possible convexity adjustments into account
(e.g. Quanto adjustments).
For interest rate derivatives:
• Black-Scholes models apply a lognormal process for forward rates and
consider possible convexity adjustments (e.g., arrears, timing adjustments).
For credit derivatives:
For share, currency,
inflation or commodity
derivatives:
• Forward structure of
the underlying asset.
• Volatility of options.
ASSETS
Trading Derivatives 32,712
Hedging Derivatives 2,988
• Derivatives
For share, currency or commodity
derivatives:
• Monte Carlo simulations.
• Black-Scholes models on risk premiums.
Local volatility model: assumes a constant diffusion of the underlying asset with the
volatility depending on the value of the underlying asset and the term.
For interest rate
derivatives:
• The term structure of
interest rates.
LIABILITIES
For interest rate derivatives:
This model assumes that:
• Volatility
underlying asset.
of
• Black-Derman-Toy Model,
Libor Market Model and
SABR.
For credit derivatives:
• Diffusion model
• Short-term interest rates follow a lognormal process.
• The forward rates in the term structure of the interest rate curve are perfectly
correlated.
These models assume a constant diffusion of default intensity.
For credit derivatives:
• Credit default swap
(CDS) pricing.
Trading Derivatives 31,370
Hedging Derivatives 1,391
51