Summary of Fair Value of Financial Instruments

Determining estimated fair values of our financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. Market assumptions and/or estimation methodologies used may have a material effect on estimated fair value amounts. Accordingly, estimates presented are not necessarily indicative of amounts at which these instruments could be purchased, sold, or settled. Carrying amounts and estimated fair values of financial instruments, for periods indicated, were as follows (in thousands):



	December 31, 2016				December 31, 2015
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Derivative assets, net	$	3,614	$	3,614	$	3,435	$	3,435
Marketable securities	53,185		53,185		—		—

Financial assets not measured at fair value:
Cash and cash equivalents ⁽¹⁾	$	348,067	$	348,067	$	215,078	$	215,078
Restricted cash ⁽¹⁾	144,406		144,406		153,680		153,680
Accounts receivable, net ⁽¹⁾	44,934		44,934		40,438		40,438
Note receivable, net	—		—		3,746		3,344 to 3,696
Due from Ashford Prime OP, net	—		—		528		528
Due from third-party hotel managers	13,348		13,348		22,869		22,869

Financial liabilities not measured at fair value:
Indebtedness ⁽¹⁾	$	3,777,127	$3,600,691 to $3,979,713		$	3,874,617	$3,683,196 to $4,070,904
Accounts payable and accrued expenses ⁽¹⁾	128,309		128,309		123,444		123,444
Dividends payable	24,765		24,765		22,678		22,678
Due to Ashford Inc., net	15,716		15,716		9,856		9,856
Due to Ashford Prime OP, net	488		488		—		—
Due to related party, net⁽¹⁾	1,046		1,046		1,339		1,339
Due to third-party hotel managers	2,714		2,714		2,504		2,504

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⁽¹⁾Includes balances associated with assets held for sale and liabilities associated with assets held for sale as of December 31, 2016. See note 6.

Cash, cash equivalents, and restricted cash. These financial assets bear interest at market rates and have original maturities of less than 90 days. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, accounts payable and accrued expenses, dividends payable, due to/from Ashford Prime OP, due to/from related party, due from affiliates, due to/from Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to their short-term nature. This is considered a Level 1 valuation technique.

Note receivable, net. Fair value of notes receivable is determined using similar loans with similar collateral. We relied on our internal analysis of what we believe a willing buyer would pay for this note. We estimated the fair value of the note receivable to be approximately 10.7% to 1.3% lower than the carrying value of $3.7 million at December 31, 2015. This is considered a Level 2 valuation technique.

Marketable securities. Marketable securities consist of U.S. treasury bills, publicly traded equity securities, and put and call options on certain publicly traded equity securities. The fair value of these investments is based on quoted market closing prices at the balance sheet date. See notes 2, 10, and 11 for a complete description of the methodology and assumptions utilized in determining the fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. Current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied and adjusted for credit spreads. Credit spreads take into consideration general market conditions, maturity, and collateral. We estimated the fair value of total indebtedness to be approximately 95.3% to 105.4% of the carrying value of $3.8 billion at December 31, 2016 and approximately 95.1% to 105.1% of the carrying value of $3.9 billion at December 31, 2015. This is considered a Level 2 valuation technique.

Derivative assets, net. Fair value of interest rate derivatives is determined using the net present value of the expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair values of credit default swap derivatives are obtained from a third party who publishes the CMBX index composition and price data. Fair values of interest rate floors are calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. Fair values of options on futures contracts are valued at their last reported settlement price as of the measurement date. See notes 2, 10 and 11 for a complete description of the methodology and assumptions utilized in determining fair values.