Fair Value Disclosures

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on NAV of $40.2 million and $42.2 million at August 31, 2015 and November 30, 2014, respectively, by level within the fair value hierarchy (in thousands):



	August 31, 2015
	Level 1(1)		Level 2(1)		Level 3		Counterparty and Cash Collateral Netting (2)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	2,454,674	$	176,636	$	38,502	$	—		$	2,669,812
Corporate debt securities	—		2,956,190		24,331		—			2,980,521
Collateralized debt obligations	—		151,499		81,050		—			232,549
U.S. government and federal agency securities	2,109,086		592,321		—		—			2,701,407
Municipal securities	—		599,471		—		—			599,471
Sovereign obligations	1,052,681		798,645		—		—			1,851,326
Residential mortgage-backed securities	—		3,824,389		86,422		—			3,910,811
Commercial mortgage-backed securities	—		1,465,115		15,147		—			1,480,262
Other asset-backed securities	—		64,648		32,596		—			97,244
Loans and other receivables	—		1,666,454		95,399		—			1,761,853
Derivatives	2,182		4,827,243		34,345		(4,394,947		)	468,823
Investments at fair value	—		16,866		66,209		—			83,075
Physical commodities	—		14,973		—		—			14,973
Total financial instruments owned, excluding Investments at fair value based on NAV	$	5,618,623	$	17,154,450	$	474,001	$	(4,394,947	)	$	18,852,127
Cash and cash equivalents	$	3,441,785	$	—	$	—	$	—		$	3,441,785
Cash and securities segregated and on deposit for regulatory purposes	$	904,009	$	—	$	—	$	—		$	904,009
Securities received as collateral	$	11,365	$	—	$	—	$	—		$	11,365

Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	1,711,938	$	99,051	$	—	$	—		$	1,810,989
Corporate debt securities	—		1,932,534		226		—			1,932,760
U.S. government and federal agency securities	2,414,440		133,181		—		—			2,547,621
Sovereign obligations	1,228,377		874,705		—		—			2,103,082
Residential mortgage-backed securities	—		3,329		—		—			3,329
Loans	—		819,841		10,371		—			830,212
Derivatives	1,931		4,680,726		41,508		(4,504,522		)	219,643
Total financial instruments sold, not yet purchased	$	5,356,686	$	8,543,367	$	52,105	$	(4,504,522	)	$	9,447,636
Obligation to return securities received as collateral	$	11,365	$	—	$	—	$	—		$	11,365
Other secured financings	$	—	$	70,327	$	574	$	—		$	70,901
Embedded conversion option	$	—	$	—	$	114	$	—		$	114


(1)	There were no material transfers between Level 1 and Level 2 for the nine months ended August 31, 2015.


(2)	Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.



	November 30, 2014
	Level 1 (1)		Level 2 (1)		Level 3			Counterparty and Cash Collateral Netting (2)			Total
Assets:
Financial instruments owned:
Corporate equity securities	$	2,178,837	$	226,441	$	20,964		$	—		$	2,426,242
Corporate debt securities	—		3,342,276		22,766		(4)	—			3,365,042
Collateralized debt obligations	—		306,218		124,650		(4)	—			430,868
U.S. government and federal agency securities	2,694,268		81,273		—			—			2,775,541
Municipal securities	—		590,849		—			—			590,849
Sovereign obligations	1,968,747		790,764		—			—			2,759,511
Residential mortgage-backed securities	—		2,879,954		82,557			—			2,962,511
Commercial mortgage-backed securities	—		966,651		26,655			—			993,306
Other asset-backed securities	—		137,387		2,294			—			139,681
Loans and other receivables	—		1,458,760		97,258			—			1,556,018
Derivatives	65,145		5,046,278		54,190			(4,759,345		)	406,268
Investments at fair value	—		73,148		53,224			—			126,372
Physical commodities	—		62,234		—			—			62,234
Total financial instruments owned, excluding Investments at fair value based on NAV	$	6,906,997	$	15,962,233	$	484,558		$	(4,759,345	)	$	18,594,443
Cash and cash equivalents	$	4,079,968	$	—	$	—		$	—		$	4,079,968
Cash and securities segregated and on deposit for regulatory purposes (3)	$	3,444,674	$	—	$	—		$	—		$	3,444,674
Securities received as collateral	$	5,418	$	—	$	—		$	—		$	5,418
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	1,911,145	$	74,681	$	38		$	—		$	1,985,864
Corporate debt securities	—		1,611,994		223			—			1,612,217
Collateralized debt obligations	—		4,557		—			—			4,557
U.S. government and federal agency securities	2,253,055		—		—			—			2,253,055
Sovereign obligations	1,217,075		574,010		—			—			1,791,085
Loans	—		856,525		14,450			—			870,975
Derivatives	52,778		5,117,803		49,552			(4,856,618		)	363,515
Total financial instruments sold, not yet purchased	$	5,434,053	$	8,239,570	$	64,263		$	(4,856,618	)	$	8,881,268
Obligation to return securities received as collateral	$	5,418	$	—	$	—		$	—		$	5,418
Other secured financings	$	—	$	—	$	30,825		$	—		$	30,825
Embedded conversion option	$	—	$	—	$	693		$	—		$	693


(1)	At December 1, 2013, equity options presented within Financial instruments owned and Financial instruments sold, not yet purchased of $6.1 million and $6.6 million, respectively, were transferred from Level 1 to Level 2 as adjustments were incorporated into the valuation approach for such contracts to estimate the point within the bid-ask range that meets the best estimate of fair value.


(2)	Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.


(3)	Cash and securities segregated and on deposit for regulatory purposes include U.S. government securities with a fair value of $453.7 million and CFTC approved money market funds with a fair value of $545.0 million.


(4)	Level 3 Collateralized debt obligations increased by $33.2 million with a corresponding decrease in Level 3 Corporate debt securities from those previously reported to correct for the classification of certain positions. The total amount of Level 3 assets remained unchanged.

The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities


•	Exchange Traded Equity Securities: Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 or Level 3 of the fair value hierarchy.

•

Non-exchange Traded Equity Securities: Non-exchange traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed for recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).


•	Equity warrants: Non-exchange traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and are measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

Corporate Debt Securities

•

Corporate Bonds: Corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed for recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Corporate bonds measured using alternative valuation techniques are categorized within Level 3 of the fair value hierarchy and comprise a limited portion of our corporate bonds.

•

High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed for recently executed market transactions of comparable size. Where pricing data is less observable, valuations are categorized within Level 3 and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s subsequent financings or recapitalizations, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

Collateralized Debt Obligations

Collateralized debt obligations are measured based on prices observed for recently executed market transactions of the same or similar security or based on valuations received from third party brokers or data providers and are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on recently executed market transitions of similar securities incorporates additional review and analysis of pricing inputs and comparability criteria including but not limited to collateral type, tranche type, rating, origination year, prepayment rates, default rates, and severities.

U.S. Government and Federal Agency Securities


•	U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices and categorized within Level 1 of the fair value hierarchy.


•	U.S. Agency Issued Debt Securities: Callable and non-callable U.S. agency issued debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Municipal Securities

Municipal securities are measured based on quoted prices obtained from external pricing services and are generally categorized within Level 2 of the fair value hierarchy.

Sovereign Obligations

Foreign sovereign government obligations are measured based on quoted market prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size. To the extent external price quotations are not available or recent transactions have not been observed, valuation techniques incorporating interest rate yield curves and country spreads for bonds of similar issuers, seniority and maturity are used to determine fair value of sovereign bonds or obligations. Foreign sovereign government obligations are classified in Level 1, 2 or Level 3 of the fair value hierarchy, primarily based on the country of issuance.

Residential Mortgage-Backed Securities


•	Agency Residential Mortgage-Backed Securities: Agency residential mortgage-backed securities include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and interest-only and principal-only securities and are generally measured using market price quotations from external pricing services and categorized within Level 2 of the fair value hierarchy.

•

Agency Residential Interest-Only and Inverse Interest-Only Securities (“Agency Inverse IOs”): The fair value of agency inverse IOs is estimated using expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral. We use prices observed for recently executed transactions to develop market-clearing spread and yield curve assumptions. Valuation inputs with regard to the underlying collateral incorporate weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer, and weighted average loan age. Agency inverse IOs are categorized within Level 2 or Level 3 of the fair value hierarchy. We also use vendor data in developing our assumptions, as appropriate.

•

Non-Agency Residential Mortgage-Backed Securities: Fair values are determined primarily using discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields.

Commercial Mortgage-Backed Securities

•

Agency Commercial Mortgage-Backed Securities: Government National Mortgage Association (“GNMA”) project loans are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation for various factors, including prepayment speeds, default rates, and cash flow structures as well as the likelihood of pricing levels in the current market environment. Federal National Mortgage Association (“FNMA”) Delegated Underwriting and Servicing (“DUS”) mortgage-backed securities are generally measured by using prices observed for recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. GNMA project loan bonds and FNMA DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.


•	Non-Agency Commercial Mortgage-Backed Securities: Non-agency commercial mortgage-backed securities are measured using pricing data obtained from external pricing services and prices observed for recently executed market transactions and are categorized within Level 2 and Level 3 of the fair value hierarchy.

Other Asset-Backed Securities

Other asset-backed securities include, but are not limited to, securities backed by auto loans, credit card receivables, student loans and other consumer loans and are categorized within Level 2 and Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services and prices observed for recently executed market transactions.

Loans and Other Receivables

•

Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market price quotations where market price quotations from external pricing services are supported by market transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on market price quotations that are considered to be less transparent, market prices for debt securities of the same creditor, and estimates of future cash flow incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer’s capital structure.

•

Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

•

Project Loans and Participation Certificates in GNMA Project and Construction Loans: Valuations of participation certificates in GNMA project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations of assets with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans incorporating an evaluation for various factors, including prepayment speeds, default rates, and cash flow structures as well as the likelihood of pricing levels in the current market environment. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

•

Consumer Loans and Funding Facilities: Consumer and small business whole loans and related funding facilities are valued based on observed market transactions incorporating additional valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

•

Escrow and Trade Claim Receivables: Escrow and trade claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. Escrow and trade claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent trade activity in the same security.

Derivatives

•

Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on quoted exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy. Listed derivatives for which there is limited trading activity are measured based on incorporating the closing auction price of the underlying equity security, use similar valuation approaches as those applied to over-the-counter derivative contracts and are categorized within Level 2 of the fair value hierarchy.

•

OTC Derivative Contracts: Over-the-counter (“OTC”) derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current period transaction. Inputs to valuation models are appropriately calibrated to market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using various valuation models, such as the Black-Scholes, with key inputs impacting the valuation including the underlying security, foreign exchange spot rate or commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves and valuations of our commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices and forward curves. Credit default swaps include both index and single-name credit default swaps. External prices are available as inputs in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from external pricing services.

Physical Commodities

Physical commodities include base and precious metals and are measured using observable inputs including spot prices and published indices. Physical commodities are categorized within Level 2 of the fair value hierarchy. To facilitate the trading in precious metals we undertake leasing of such precious metals. The fees earned or paid for such leases are recorded as Principal transaction revenues in the Consolidated Statements of Earnings.

Investments at Fair Value and Investments in Managed Funds

Investments at fair value based on NAV and Investments in Managed Funds include investments in hedge funds, fund of funds, private equity funds, convertible bond funds and commodity funds, which are measured at the net asset value of the funds provided by the fund managers and are excluded from the fair value hierarchy. Investments at fair value also include direct equity investments in private companies, which are measured at fair value using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and transaction prices observed for subsequent financing or capital issuance by the company. Direct equity investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy. Additionally, investments at fair value include investments in insurance contracts relating to our defined benefit plan in Germany. Fair value for the insurance contracts is determined using a third party and is categorized within Level 3 of the fair value hierarchy.

The following tables present information about our investments in entities that have the characteristics of an investment company at August 31, 2015 and November 30, 2014 (in thousands):



	August 31, 2015
	Fair Value (1)		Unfunded Commitments		Redemption Frequency (if currently eligible)
Equity Long/Short Hedge Funds (2)	$	79,431	$	—	Monthly, Quarterly
Fixed Income and High Yield Hedge Funds (3)	2,130		—		—
Fund of Funds (4)	286		94		—
Equity Funds (5)	41,691		20,792		—
Convertible Bond Funds (6)	3,472		—		At Will
Total	$	127,010	$	20,886



	November 30, 2014
	Fair Value (1)		Unfunded Commitments		Redemption Frequency (if currently eligible)
Equity Long/Short Hedge Funds (2)	$	44,983	$	—	Monthly, Quarterly
Fixed Income and High Yield Hedge Funds (3)(7)	2,704		—		—
Fund of Funds (4)	323		94		—
Equity Funds (5)	65,216		26,023		—
Convertible Bond Funds (6)	3,355		—		At Will
Total	$	116,581	$	26,117


(1)	Where fair value is calculated based on NAV, fair value has been derived from each of the funds’ capital statements.


(2)	This category includes investments in hedge funds that invest, long and short, in primarily equity securities in domestic and international markets in both the public and private sectors. At August 31, 2015 and November 30, 2014, investments representing approximately 100% and 99%, respectively, of the fair value of investments in this category are redeemable with 30-90 days prior written notice.

(3)

Includes investments in funds that invest in loans secured by a first trust deed on property, domestic and international public high yield debt, private high yield investments, senior bank loans, public leveraged equities, distressed debt, and private equity investments. There are no redemption provisions. At August 31, 2015 and November 30, 2014, the underlying assets of 7% and 8%, respectively, of these funds are being liquidated and we are unable to estimate when the underlying assets will be fully liquidated.

(4)

Includes investments in fund of funds that invest in various private equity funds. At August 31, 2015 and November 30, 2014, approximately 95% and 95%, respectively, of the fair value of investments in this category are managed by us and have no redemption provisions, instead distributions are received through the liquidation of the underlying assets of the fund of funds, which are estimated to be liquidated in the next sixteen months. For the remaining investments, we have requested redemption; however, we are unable to estimate when these funds will be received.

(5)

At August 31, 2015 and November 30, 2014, approximately 100% and 99%, respectively, of the fair value of investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies in the energy, technology, internet service and telecommunication service industries. These investments cannot be redeemed, instead distributions are received through the liquidation of the underlying assets of the funds which are expected to liquidate in one to eight years.


(6)	This category represents an investment in the Jefferies Umbrella Fund, an open-ended investment company managed by us that invests primarily in convertible bonds. The remaining investments are in liquidation and we are unable to estimate when the underlying assets will be fully liquidated.


(7)	Fixed income and high yield hedge funds was revised by $2.5 million from that previously reported due to the inclusion of a fixed income fund, which has the characteristics of an investment company that is included in Investments at fair value within Financial instruments owned in the Consolidated Statement of Financial Condition. The total amount of Investments at fair value remained unchanged.

Other Secured Financings

Other secured financings that are accounted for at fair value include notes issued by consolidated VIEs, which are classified as Level 2 or Level 3 within the fair value hierarchy. Fair value is based on recent transaction prices for similar assets. In addition, at August 31, 2015 and November 30, 2014, Other secured financings includes $0.0 and $7.8 million, respectively, related to transfers of loans accounted for as secured financings rather than as sales and classified as Level 3 within the fair value hierarchy.

Embedded Conversion Option

The embedded conversion option presented within long-term debt represents the fair value of the conversion option on Leucadia shares within our 3.875% Convertible Senior Debentures, due November 1, 2029 and categorized as Level 3 within the fair value hierarchy. The conversion option was valued using a convertible bond model using as inputs the price of Leucadia's common stock, the conversion strike price, 252-day historical volatility, a maturity date of November 1, 2017 (the first put date), dividend yield and the risk-free interest rate curve.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended August 31, 2015 (in thousands):



	Three Months Ended August 31, 2015
	Balance at May 31, 2015			Total gains/ losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2015		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2015 (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	20,547		$	3,901		$	21,162		$	(5,173	)	$	—		$	—	$	(1,935	)	$	38,502	$	3,803
Corporate debt securities	31,917			(5,276		)	10,395			(17,197		)	(1		)	—		4,493			24,331		(5,544		)
Collateralized debt obligations	89,007			(12,560		)	14,961			—			(13,230		)	—		2,872			81,050		(12,561		)
Residential mortgage-backed securities	88,695			(3,009		)	10,034			(8,424		)	(195		)	—		(679		)	86,422		655
Commercial mortgage-backed securities	17,862			(510		)	—			(680		)	—			—		(1,525		)	15,147		(545		)
Other asset-backed securities	11,857			870			21,913			—			(1,167		)	—		(877		)	32,596		813
Loans and other receivables	108,756			(2,111		)	31,269			(603		)	(42,529		)	—		617			95,399		(6,182		)
Investments at fair value	131,343			83,580			—			(127,427		)	(277		)	—		(21,010		)	66,209		19,675
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	38		$	—		$	—		$	—		$	—		$	—	$	(38	)	$	—	$	—
Corporate debt securities	452			(226		)	—			—			—			—		—			226		226
Net derivatives (2)	(1,586		)	(1,020		)	(1,432		)	11,618			24			416		(857		)	7,163		551
Loans	10,732			109			(3,012		)	—			—			—		2,542			10,371		(110		)
Other secured financings	56,060			—			—			—			(3,914		)	—		(51,572		)	574		—
Embedded conversion option	725			(611		)	—			—			—			—		—			114		611


(1)	Realized and unrealized gains/losses are reported in Principal transaction revenues in the Consolidated Statements of Earnings.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased —Derivatives.

Analysis of Level 3 Assets and Liabilities for the Three Months Ended August 31, 2015

During the three months ended August 31, 2015, transfers of assets of $73.4 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:


•	Collateralized debt obligations of $42.8 million, non-agency residential mortgage-backed securities of $17.8 million, commercial mortgage-backed securities of $3.7 million for which no recent trade activity was observed for purposes of determining observable inputs;


•	Loans and other receivables of $4.1 million due to a lower number of contributors comprising vendor quotes to support classification within Level 2;


•	Corporate debt securities of $5.0 million due to a lack of observable market transactions.

During the three months ended August 31, 2015, transfers of assets of $91.4 million from Level 3 to Level 2 are primarily attributed to:


•	Non-agency residential mortgage-backed securities of $18.5 million, commercial mortgage-backed securities of $5.2 million for which market trades were observed in the period for either identical or similar securities;


•	Collateralized debt obligations of $39.9 million due to a greater number of contributors for certain vendor quotes supporting classification into Level 2;


•	Investment at fair value of $21.0 million due to an increase in observable market transactions;


•	Loans and other receivables of $3.5 million due to a greater number of contributors for certain vendor quotes supporting classification into Level 2;


•	Corporate equity securities of $1.9 million due to an increase in observable market transactions.

There were $2.5 million transfers of loan liabilities from Level 2 to Level 3 due to a decrease in observable inputs in the valuation and $51.6 million transfers of other secured financings from Level 3 to Level 2 due to an increase in observable inputs in the valuation.

Net gains on Level 3 assets were $64.9 million and net gains on Level 3 liabilities were $1.7 million for the three months ended August 31, 2015. Net gains on Level 3 assets were primarily due to increased valuations of corporate equity securities and investments at fair value, partially offset by a decrease in valuation of collateralized debt obligations, corporate debt securities, residential mortgage-backed securities and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of certain derivative instruments.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the nine months ended August 31, 2015 (in thousands):



	Nine Months Ended August 31, 2015
	Balance at November 30, 2014			Total gains/ losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2015		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2015 (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	20,964		$	10,247		$	22,631		$	(5,176	)	$	—		$	—	$	(10,164	)	$	38,502	$	10,210
Corporate debt securities	22,766			(5,425		)	83,613			(88,711		)	(1		)	—		12,089			24,331		(5,797		)
Collateralized debt obligations	124,650			(28,999		)	63,038			(47,570		)	(20,481		)	—		(9,588		)	81,050		(22,654		)
Residential mortgage-backed securities	82,557			(6,776		)	30,865			(25,222		)	(358		)	—		5,356			86,422		(2,507		)
Commercial mortgage-backed securities	26,655			(2,053		)	3,366			(9,973		)	(6,981		)	—		4,133			15,147		(1,851		)
Other asset-backed securities	2,294			666			69,892			(40,000		)	(1,438		)	—		1,182			32,596		607
Loans and other receivables	97,258			(7,331		)	115,370			(40,978		)	(82,100		)	—		13,180			95,399		(8,850		)
Investments, at fair value	53,224			88,195			—			(124,854		)	(3,818		)	—		53,462			66,209		24,372
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	38		$	—		$	—		$	—		$	—		$	—	$	(38	)	$	—	$	—
Corporate debt securities	223			(1		)	(6,677		)	6,804			—			—		(123		)	226		(226		)
Net derivatives (2)	(4,638		)	3,022			(4,527		)	11,340			(30		)	1,901		95			7,163		(5,211		)
Loans	14,450			(102		)	(3,487		)	—			—			—		(490		)	10,371		102
Other secured financings	30,825			—			—			—			(15,674		)	36,995		(51,572		)	574		—
Embedded conversion option	693			(579		)	—			—			—			—		—			114		579


(1)	Realized and unrealized gains/losses are reported in Principal transaction revenues in the Consolidated Statements of Earnings.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased —Derivatives.

Analysis of Level 3 Assets and Liabilities for the Nine Months Ended August 31, 2015

During the nine months ended August 31, 2015, transfers of assets of $157.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:


•	Collateralized debt obligations of $16.0 million, non-agency residential mortgage-backed securities of $21.3 million, commercial mortgage-backed securities of $9.8 million and other asset-backed securities of $1.4 million for which no recent trade activity was observed for purposes of determining observable inputs;


•	Loans and other receivables of $19.2 million due to a lower number of contributors comprising vendor quotes to support classification within Level 2;


•	Corporate debt securities of $12.2 million, corporate equity securities of $1.6 million and investments at fair value of $76.2 million due to a lack of observable market transactions.

During the nine months ended August 31, 2015, transfers of assets of $88.1 million from Level 3 to Level 2 are primarily attributed to:


•	Non-agency residential mortgage-backed securities of $15.9 million and commercial mortgage-backed securities of $5.6 million for which market trades were observed in the period for either identical or similar securities;


•	Collateralized debt obligations of $25.6 million and loans and other receivables of $6.1 million due to a greater number of contributors for certain vendor quotes supporting classification into Level 2;


•	Investment at fair value of $22.7 million due to an increase in observable market transactions;


•	Corporate equity securities of $11.8 million due to an increase in observable market transactions.

There were $51.6 million transfers of other secured financings from Level 3 to Level 2 due to an increase in observable inputs in the valuation.

Net gains on Level 3 assets were $48.5 million and net losses on Level 3 liabilities were $2.3 million for the nine months ended August 31, 2015. Net gains on Level 3 assets were primarily due to increased valuations of certain investments at fair value and corporate equity securities, partially offset by decreased valuations of collateralized debt obligations, loans and other receivables and residential and commercial mortgage-backed securities, and corporate debt securities. Net losses on Level 3 liabilities were primarily due to increased valuations of certain derivative instruments.



	Three Months Ended August 31, 2014 (1)
	Balance at May 31, 2014		Total gains/ losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2014		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2014 (2)
Assets:
Financial instruments owned:
Corporate equity securities	$	16,402	$	(480	)	$	4,528		$	(529	)	$	—		$	—	$	(12,144	)	$	7,777	$	(286	)
Corporate debt securities	31,648		5,454			21,793			(15,713		)	(34		)	—		(6,264		)	36,884		3,470
Collateralized debt obligations	42,313		(845		)	7,613			(15,204		)	—			—		9,863			43,740		(1,575		)
U.S. government and federal agency securities	—		(11		)	2,505			—			—			—		—			2,494		(11		)
Residential mortgage-backed securities	71,962		(2,557		)	3,981			(9,635		)	(325		)	—		17,608			81,034		(302		)
Commercial mortgage-backed securities	24,246		(256		)	641			(7,068		)	—			—		1,764			19,327		(832		)
Other asset-backed securities	45,444		1,272			50,620			(49,411		)	(8,774		)	—		(37,072		)	2,079		(3		)
Loans and other receivables	138,643		(8,074		)	194,387			(96,340		)	(40,617		)	—		26			188,025		(7,967		)
Investments at fair value	79,316		(512		)	500			(5,414		)	(305		)	—		5,416			79,001		(403		)
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	38	$	—		$	—		$	—		$	—		$	—	$	—		$	38	$	—
Corporate debt securities	2,780		(101		)	(2,566		)	—			—			—		129			242		67
Net derivatives (3)	15,282		(1,632		)	(74		)	74			(70		)	—		—			13,580		70
Loans	31,534		—			(16,307		)	—			—			—		(8,566		)	6,661		—
Other secured financings	20,288		—			—			—			(7,570		)	18,948		—			31,666		—
Embedded conversion option	3,895		(2,463		)	—			—			—			—		—			1,432		2,463


(1)	Realized and unrealized gains/losses are reported in Principal transaction revenues in the Consolidated Statements of Earnings.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased —Derivatives.

Analysis of Level 3 Assets and Liabilities for the Three Months Ended August 31, 2014

During the three months ended August 31, 2014, transfers of assets of $87.8 million from Level 2 to Level 3 of the fair value hierarchy are attributed to:


•	Non-agency residential mortgage-backed securities of $30.1 million, commercial mortgage-backed securities of $6.8 million and other asset-backed securities of $1.5 million for which no recent trade activity was observed for purposes of determining observable inputs;


•	Loans and other receivables of $25.1 million and investments at fair value of $5.4 million due to a lower number of contributors comprising vendor quotes to support classification within Level 2;


•	Collateralized debt obligations of $15.2 million which have little to no transparency related to trade activity.

During the three months ended August 31, 2014, transfers of assets of $108.6 million from Level 3 to Level 2 are attributed to:


•	Non-agency residential mortgage-backed securities of $12.5 million, commercial mortgage-backed securities of $5.0 million and other asset-backed securities of $38.6 million for which market trades were observed in the period for either identical or similar securities;


•	Collateralized debt obligations of $5.3 million, loans and other receivables of $25.1 million due to a greater number of contributors for certain vendor quotes supporting classification into Level 2;


•	Corporate equity securities of $13.9 million due to an increase in observable market transactions.

During the three months ended August 31, 2014, there were transfers of loan liabilities of $8.6 million from Level 3 to Level 2 due to an increase in observable inputs in the valuation.

Net losses on Level 3 assets were $6.0 million and net gains on Level 3 liabilities were $4.2 million for the three months ended August 31, 2014. Net losses on Level 3 assets were primarily due to decreased valuations of certain loans and other receivables, residential and commercial mortgage-backed securities, collateralized debt obligations, corporate equity securities and investments at fair value, partially offset by an increase in valuation of certain corporate debt securities and other asset-backed securities. Net gains on Level 3 liabilities were primarily due to decreased valuations of the embedded conversion option, certain derivative instruments and certain corporate debt securities.




	Nine Months Ended August 31, 2014
	Balance at November 30, 2013		Total gains/ losses (realized and unrealized) (1)			Purchases			Sales			Settlements			Issuances		Net transfers into/ (out of) Level 3			Balance at August 31, 2014		Change in unrealized gains/ (losses) relating to instruments still held at August 31, 2014 (1)
Assets:
Financial instruments owned:
Corporate equity securities	$	9,884	$	(1,528	)	$	36,661		$	(31,444	)	$	—		$	—	$	(5,796	)	$	7,777	$	(400	)
Corporate debt securities	25,666		10,727			137,164			(128,733		)	—			—		(7,940		)	36,884		10,177
Collateralized debt obligations	37,216		5,198			94,743			(99,661		)	—			—		6,244			43,740		(6,283		)
U.S. government and federal agency securities	—		(11		)	2,505			—			—			—		—			2,494		(11		)
Residential mortgage-backed securities	105,492		(6,974		)	44,454			(65,229		)	(812		)	—		4,103			81,034		(3,564		)
Commercial mortgage-backed securities	17,568		(3,120		)	34,959			(32,774		)	(1,315		)	—		4,009			19,327		(3,380		)
Other asset-backed securities	12,611		256			52,495			(52,282		)	(8,804		)	—		(2,197		)	2,079		—
Loans and other receivables	145,890		(9,028		)	247,383			(147,851		)	(61,791		)	—		13,422			188,025		(8,961		)
Investments, at fair value	66,931		23,615			28,160			(38,062		)	(945		)	—		(698		)	79,001		9,126
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities	$	38	$	—		$	—		$	—		$	—		$	—	$	—		$	38	$	—
Corporate debt securities	—		163			(7		)	97			—			—		(11		)	242		(163		)
Net derivatives (2)	6,905		9,959			(124		)	(76		)	248			—		(3,332		)	13,580		—
Loans	22,462		—			(15,472		)	3,549			—			—		(3,878		)	6,661		(10,519		)
Other secured financings	8,711		—			—			—			(16,684		)	39,639		—			31,666		—
Embedded conversion option	9,574		(8,142		)	—			—			—			—		—			1,432		8,142


(1)	Realized and unrealized gains/losses are reported in Principal transaction revenues in the Consolidated Statements of Earnings.


(2)	Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased —Derivatives.

Analysis of Level 3 Assets and Liabilities for the Nine Months Ended August 31, 2014

During the nine months ended August 31, 2014, transfers of assets of $79.3 million from Level 2 to Level 3 of the fair value hierarchy are attributed to:


•	Non-agency residential mortgage-backed securities of $27.2 million, commercial mortgage-backed securities of $4.6 million and other asset-backed securities of $1.3 million for which no recent trade activity was observed for purposes of determining observable inputs;


•	Loans and other receivables of $31.4 million due to a lower number of contributors comprising vendor quotes to support classification within Level 2;


•	Collateralized debt obligations of $7.5 million which have little to no transparency in trade activity.


•	Investments at fair value of $6.5 million due to lack of observable market transactions.

During the nine months ended August 31, 2014, transfers of assets of $68.1 million from Level 3 to Level 2 are attributed to:


•	Non-agency residential mortgage-backed securities of $23.1 million, commercial mortgage-backed securities of $0.5 million and other asset-backed securities of $3.5 million for which market trades were observed in the period for either identical or similar securities;


•	Collateralized debt obligations of $1.3 million, loans and other receivables of $18.0 million and investments at fair value of $7.2 million due to a greater number of contributors for certain vendor quotes supporting classification into Level 2;


•	Corporate equity securities of $6.5 million and corporate debt securities of $8.0 million due to an increase in observable market transactions.

During the nine months ended August 31, 2014, there were transfers of $3.9 million of loan liabilities and $3.3 million of net derivative liabilities from Level 3 to Level 2 due to an increase in observable inputs used in the valuation of certain loans and derivatives contracts, respectively.

Net gains on Level 3 assets were $19.1 million and net losses on Level 3 liabilities were $2.0 million for the nine months ended August 31, 2014. Net gains on Level 3 assets were primarily due to increased valuations of certain investments at fair value, corporate debt securities and collateralized debt obligations, partially offset by a decrease in valuation of certain residential and commercial mortgage-backed securities, loans and other receivables, and corporate equity securities. Net losses on Level 3 liabilities were primarily due to increased valuation of certain derivative instruments, partially offset by decreased valuation of the embedded conversion option.

Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements at August 31, 2015 and November 30, 2014

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.



August 31, 2015
Financial Instruments Owned	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average
Corporate equity securities	$	17,340
Non-exchange traded securities			Market approach	EBITDA (a) multiple	4.6 to 8.5	6.6
			Discounted cash flows	Underlying stock price	$5 to $7	$	6
Corporate debt securities	$	24,331
			Convertible bond model	Discount rate/yield	74%	—
			Market approach	Discount rate/yield	19%	—
				Transaction level	$138	—
Collateralized debt obligations	$	33,075	Discounted cash flows	Constant prepayment rate	0% to 20%	17		%
				Constant default rate	0% to 2%	2		%
				Loss severity	25% to 100%	40		%
				Yield	10% to 13%	11		%
Residential mortgage-backed securities	$	86,422	Discounted cash flows	Constant prepayment rate	0% to 50%	12		%
				Constant default rate	1% to 8%	5		%
				Loss severity	25% to 80%	52		%
				Yield	1% to 11%	5		%
Commercial mortgage-backed securities	$	15,147	Discounted cash flows	Yield	8% to 20%	14		%
				Cumulative loss rate	2% to 54%	15		%
Other asset-backed securities	$	32,596	Discounted cash flows	Constant prepayment rate	0% to 24%	10		%
				Constant default rate	0% to 9%	5		%
				Loss severity	0% to 100%	77		%
				Yield	1% to 25%	10		%
			Over-collateralization	Over-collateralization percentage	111% to 125%	123		%
Loans and other receivables	$	85,445	Comparable pricing	Comparable loan price	$91 to $100	$	97.0
			Market approach	Discount rate/yield	2% to 13%	10		%
				EBITDA (a) multiple	6.9	—
			Scenario analysis	Estimated recovery percentage	34% to 77%	39		%
Derivatives	20,308
Foreign exchange options			Option Model	Volatility	11%	—		%
Unfunded commitment			Comparable pricing	Comparable loan price	$91 to $100	$	100
			Market approach	Discount rate/yield	12% to 15%	13		%
Foreign exchange forwards				Credit spread	500 bps	—
Investments at fair value
Private equity securities	$	38,497	Market approach	Transaction level	$3 to $56	$	10
Liabilities
Financial Instruments Sold, Not Yet Purchased:
Derivatives	$	41,508
Foreign exchange options			Option model	Volatility	11%	—		%
Equity options			Option model	Volatility	42%	—
			Default rate	Default probability	0%	—
Unfunded commitments			Comparable pricing	Comparable loan price	$91 to $100	$	95.8
			Market approach	Discount rate/yield	4% to 15%	13		%
			Discounted cash flows	Constant prepayment rate	20%	—
				Constant default rate	2%	—
				Loss severity	30%	—
				Yield	11%	—
Loans and other receivables	$	10,371	Comparable pricing	Comparable loan price	$100	—
Embedded conversion option	$	114	Option valuation model	Historical volatility	22%	—


(a)	Earnings before interest, taxes, depreciation and amortization (“EBITDA”).



November 30, 2014
Financial Instruments Owned	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input / Range	Weighted Average
Corporate equity securities	$	19,814
Non-exchange traded securities			Market approach	EBITDA multiple	3.4 to 4.7	3.6
			Scenario analysis	Estimated recovery percentage	24%	—
Corporate debt securities	$	22,766	Convertible bond model	Discount rate/yield	32%	—
Collateralized debt obligations	$	41,784	Discounted cash flows	Constant prepayment rate	0% to 20%	13		%
				Constant default rate	0% to 2%	2		%
				Loss severity	0% to 70%	39		%
				Yield	2% to 51%	16		%
Residential mortgage-backed securities	$	82,557	Discounted cash flows	Constant prepayment rate	1% to 50%	13		%
				Constant default rate	1% to 100%	14		%
				Loss severity	20% to 80%	50		%
				Yield	3% to 13%	7		%
Commercial mortgage-backed securities	$	26,655	Discounted cash flows	Yield	8% to 12%	11		%
				Cumulative loss rate	4% to 72%	15		%
			Scenario analysis	Estimated recovery percentage	90%	—
Other asset-backed securities	$	2,294	Discounted cash flows	Constant prepayment rate	8%	—
				Constant default rate	3%	—
				Loss severity	70%	—
				Yield	7%	—
Loans and other receivables	$	88,154	Comparable pricing	Comparable loan price	$100 to $101	$	100.3
			Market approach	Yield	3% to 5%	4		%
				EBITDA multiple	3.4 to 8.2	7.6
			Scenario analysis	Estimated recovery percentage	10% to 41%	36		%
Derivatives	$	54,190
Foreign exchange options			Option Model	Volatility	13% to 23%	17		%
Commodity forwards			Discounted cash flows	Discount rate	17%	—
Loan commitments			Comparable pricing	Comparable loan price	$100	—
Investments at fair value	$	8,500
Private equity securities			Market approach	Transaction level	$50	—
Liabilities
Financial Instruments Sold, Not Yet Purchased:
Derivatives	$	49,552
FX options			Option model	Volatility	13% to 23%	17		%
Unfunded commitments			Comparable pricing	Comparable loan price	$89 to $100	$	92.0
				Credit spread	45bps	—
			Market approach	Yield	5%	—
Loans and other receivables	$	14,450	Comparable pricing	Comparable loan price	$100	—
Other secured financings	$	30,825	Comparable pricing	Comparable loan price	$81 to $100	$	98.7
Embedded conversion option	$	693	Option valuation model	Historical volatility	19%	—

The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices, reported net asset value or a percentage of the reported enterprise fair value are excluded from the above tables. At August 31, 2015 and November 30, 2014, asset exclusions consisted of $120.8 million and $137.8 million, respectively, primarily comprised of investments in non-exchange traded securities, private equity securities, derivative contracts, collateralized debt obligations and certain loans and other receivables. At August 31, 2015 and November 30, 2014, liability exclusions consisted of $0.8 million and $0.3 million, respectively of certain corporate debt and equity securities and other secured financings.

Sensitivity of Fair Values to Changes in Significant Unobservable Inputs

For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the sensitivity of the fair value measurement to changes in significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:


•	Loans and other receivables and loan and unfunded commitments and other secured financings using comparable pricing valuation techniques. A significant increase (decrease) in the comparable loan price in isolation would result in a significantly higher (lower) fair value measurement.


•	Corporate debt securities using a convertible bond model. A significant increase (decrease) in the bond discount rate/yield would result in a significantly lower (higher) fair value measurement.

•

Non-exchange traded securities, corporate debt securities, loans and other receivables, unfunded commitments, foreign exchange forwards and private equity securities using a market approach valuation technique. A significant increase (decrease) in the EBITDA or other multiples in isolation would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the yield of a corporate debt security, loan and other receivable or unfunded commitment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the transaction level of a private equity security would result in a significantly higher (lower) fair value measurement.


•	Non-exchange traded securities, commercial mortgage-backed securities and loans and other receivables using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the investment would result in a significantly higher (lower) fair value measurement for the financial instrument.

•

Collateralized debt obligations, non-exchange traded securities, corporate debt securities, residential and commercial mortgage-backed securities and other asset-backed securities, commodity forwards and unfunded commitments using a discounted cash flow valuation technique. A significant decrease (increase) in the underlying stock price would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in isolation in the constant default rate, and loss severities or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate would have differing impacts depending on the capital structure of the security. A significant increase (decrease) in the loan or bond yield would result in a significantly lower (higher) fair value measurement.


•	Certain other asset-backed securities using an over-collateralization model. A significant increase (decrease) in the over-collateralization percentage would result in a significantly higher (lower) fair value measurement.


•	Derivative foreign exchange and equity options using an option model. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.


•	Derivative equity options using a default rate model. A significant increase (decrease) in default probability would result in a significantly lower (higher) fair value measurement.


•	Embedded conversion option using an option valuation model. A significant increase (decrease) in historical volatility would result in a significantly higher (lower) fair value measurement.

Fair Value Option Election

We have elected the fair value option for all loans and loan commitments made by our capital markets businesses. These loans and loan commitments include loans entered into by our investment banking division in connection with client bridge financing and loan syndications, loans purchased by our leveraged credit trading desk as part of its bank loan trading activities and mortgage loan commitments and fundings in connection with mortgage- and other asset-backed securitization activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed businesses are managed on a fair value basis. Loans are included in Financial instruments owned and loan commitments are included in Financial instruments owned and Financial instruments sold, not yet purchased on the Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate entities are included within Loans to and investments in related parties on the Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have elected the fair value option for certain financial instruments held by subsidiaries as the investments are risk managed by us on a fair value basis. The fair value option has also been elected for certain secured financings that arise in connection with our securitization activities and other structured financings. Other secured financings, Receivables – Brokers, dealers and clearing organizations, Receivables – Customers, Receivables – Fees, interest and other, Payables – Brokers, dealers and clearing organizations and Payables – Customers, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded amounts approximate fair value due to their liquid or short-term nature.

The following is a summary of gains (losses) due to changes in instrument specific credit risk on loans and other receivables and loan commitments measured at fair value under the fair value option (in thousands):



	Three Months Ended August 31,						Nine Months Ended August 31,
	2015			2014			2015			2014
Financial Instruments Owned:
Loans and other receivables	$	(13,566	)	$	(15,002	)	$	(25,686	)	$	(12,841	)
Financial Instruments Sold:
Loans	$	38		$	103		$	112		$	(751	)
Loan commitments	(51		)	1,338			(1,673		)	(10,299		)

The following is a summary of the amount by which contractual principal exceeds fair value for loans and other receivables measured at fair value under the fair value option (in thousands):



	August 31, 2015		November 30, 2014
Financial Instruments Owned:
Loans and other receivables (1)	$	354,262	$	403,119
Loans and other receivables greater than 90 days past due (1)	32,867		5,594
Loans and other receivables on nonaccrual status (1) (2)	3,330		(22,360		)


(1)	Interest income is recognized separately from other changes in fair value and is included within Interest revenues on the Consolidated Statements of Earnings.


(2)	Amounts include all loans and other receivables greater than 90 days past due.

The aggregate fair value of loans and other receivables that were greater than 90 days past due was $13.0 million and $0.0 at August 31, 2015 and November 30, 2014, respectively.

The aggregate fair value of loans and other receivables on nonaccrual status, which includes all loans and other receivables greater than 90 days past due, was $313.9 million and $274.6 million at August 31, 2015 and November 30, 2014, respectively.