FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES  (Continued) Balance Sheet Effect of Derivative Financial Instruments Derivative assets and liabilities are reported on the balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities. The fair value of our derivative instruments and the associated notional amounts at December 31 were as follows (in millions): 89 2019 2020 Notional Fair Value of Assets Fair Value of Liabilities Notional Fair Value of Assets Fair Value of Liabilities Fair value hedges Interest rate contracts $ 26,577  $ 702  $ 19  $ 26,924  $ 1,331  $ 4  Cross-currency interest rate swaps —  —  —  885  46  —  Derivatives not designated as hedging instruments Interest rate contracts 68,914  275  191  70,318  663  439  Foreign currency exchange contracts 5,540  17  79  4,378  4  80  Cross-currency interest rate swap contracts 5,849  134  67  6,849  557  1  Total derivative financial instruments, gross (a) (b) $ 106,880  $ 1,128  $ 356  $ 109,354  $ 2,601  $ 524  (a) At December 31, 2019 and 2020, we held collateral of $18 million and $9 million, and we posted collateral of $78 million and $96 million, respectively. (b) At December 31, 2019 and 2020, the fair value of assets and liabilities available for counterparty netting was $169 million and $204 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.