Valuation

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at March 31, 2015:



Description	Level 1		Level 2		Level 3		Total
Assets:	(In thousands)
Cash and cash equivalents	$	156,250	$	—	$	—	$	156,250
Investments, at fair value-
Agency residential mortgage-backed securities	$	—	$	1,142,107	$	26,335	$	1,168,442
U.S. Treasury securities	—		17,683		—		17,683
Private label residential mortgage-backed securities	—		287,644		169,371		457,015
Private label commercial mortgage-backed securities	—		—		52,214		52,214
Commercial mortgage loans	—		—		38,918		38,918
Residential mortgage loans	—		—		30,845		30,845
Other asset-backed securities and loans	—		—		123,620		123,620
Corporate debt	—		—		31,836		31,836
Real estate owned	—		—		9,070		9,070
Private corporate equity investments	—		—		21,300		21,300
Total investments, at fair value	—		1,447,434		503,509		1,950,943
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	—		—		10,809		10,809
Credit default swaps on corporate bond indices	—		50,536		—		50,536
Credit default swaps on asset-backed indices	—		2,661		—		2,661
Interest rate swaps	—		22,287		—		22,287
Total return swaps	—		1		118		119
Swaptions	—		2,212		—		2,212
Options	83		21		—		104
Futures	1,016		—		—		1,016
Warrants	—		—		100		100
Total financial derivatives–assets, at fair value	1,099		77,718		11,027		89,844



Description	Level 1			Level 2			Level 3			Total
Assets (continued):	(In thousands)
Repurchase agreements	$	—		$	44,754		$	—		$	44,754
Total investments and financial derivatives–assets, at fair value and repurchase agreements	$	1,099		$	1,569,906		$	514,536		$	2,085,541
Liabilities:
Investments sold short, at fair value-
Agency residential mortgage-backed securities	$	—		$	(1,154,779	)	$	—		$	(1,154,779	)
Government debt	—			(41,103		)	—			(41,103		)
Total investments sold short, at fair value	—			(1,195,882		)	—			(1,195,882		)
Financial derivatives–liabilities, at fair value-
Credit default swaps on corporate bond indices	—			(31,277		)	—			(31,277		)
Credit default swaps on corporate bonds	—			(1,139		)	—			(1,139		)
Credit default swaps on asset-backed indices	—			(5,970		)	—			(5,970		)
Credit default swaps on asset-backed securities	—			—			(239		)	(239		)
Interest rate swaps	—			(25,325		)	—			(25,325		)
Total return swaps	—			(18		)	(307		)	(325		)
Options	—			(431		)	—			(431		)
Swaptions	—			(1,819		)	—			(1,819		)
Futures	(425		)	—			—			(425		)
Forwards	—			(717		)	—			(717		)
Total financial derivatives–liabilities, at fair value	(425		)	(66,696		)	(546		)	(67,667		)
Securitized debt⁽¹⁾	—			—			(669		)	(669		)
Total investments sold short, financial derivatives–liabilities, and securitized debt, at fair value	$	(425	)	$	(1,262,578	)	$	(1,215	)	$	(1,264,218	)


(1)	The asset subject to the resecuritization had a fair value of $2.1 million as of March 31, 2015, which is included on the Consolidated Schedule of Investments under Principal and Interest – Private Label Securities.

The Company's reverse repurchase agreements are carried at cost, which approximates fair value. These liabilities are classified as Level 2 liabilities based on the adequacy of the collateral and their short term nature.

There were no transfers of financial instruments between Level 1 and Level 2 during the three month period ended March 31, 2015.

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of March 31, 2015:



	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value		Valuation Technique	Unobservable Input	Min			Max			Weighted Average
	(In thousands)
Private label residential mortgage-backed securities ⁽¹⁾	$	121,922	Market Quotes	Non Binding Third-Party Valuation	$	1.81		$	165.50		$	70.23
Other asset-backed securities	90,593		Market Quotes	Non Binding Third-Party Valuation	$	23.50		$	134.00		$	96.67
Private label residential mortgage-backed securities	46,780		Discounted Cash Flows	Yield	6.2		%	18.3		%	8.9		%
				Projected Collateral Prepayments	20.5		%	82.9		%	49.3		%
				Projected Collateral Losses	3.7		%	33.3		%	16.5		%
				Projected Collateral Recoveries	0.0		%	23.3		%	10.4		%
				Projected Collateral Scheduled Amortization	0.0		%	57.5		%	23.8		%
											100.0		%
Private label commercial mortgage-backed securities	17,718		Discounted Cash Flows	Yield	12.9		%	49.5		%	23.3		%
				Projected Collateral Losses	0.0		%	59.3		%	6.6		%
				Projected Collateral Recoveries	0.0		%	40.7		%	10.0		%
				Projected Collateral Scheduled Amortization	0.0		%	100.0		%	83.4		%
											100.0		%
Corporate debt and non-exchange traded corporate equity	28,574		Market Quotes	Non Binding Third-Party Valuation	$	12.40		$	107.25		$	84.53
Corporate debt and warrants	8,500		Discounted Cash Flows	Yield	15.0		%	15.0		%	15.0		%
Other asset-backed securities and loans	33,027		Discounted Cash Flows	Yield	12.0		%	17.4		%	12.7		%
				Projected Collateral Prepayments	0.0		%	69.5		%	34.9		%
				Projected Collateral Losses	2.0		%	18.9		%	11.0		%
				Projected Collateral Recoveries	0.0		%	6.1		%	2.6		%
				Projected Collateral Scheduled Amortization	21.9		%	81.1		%	51.5		%
											100.0		%
Private label commercial mortgage-backed securities	34,496		Market Quotes	Non Binding Third-Party Valuation	$	5.62		$	103.25		$	63.72
Performing commercial mortgage loans	29,441		Discounted Cash Flows	Yield	9.8		%	55.2		%	15.8		%
Non-performing commercial mortgage loans	9,477		Discounted Cash Flows	Yield	9.2		%	17.4		%	13.4		%
				Months to Resolution	4.7			6.0			5.4
Non-performing residential mortgage loan pools and real estate owned	39,915		Discounted Cash Flows	Yield	5.7		%	12.0		%	7.0		%
				Months to Resolution	4.3			169.9			38.6
Agency interest only residential mortgage-backed securities	21,914		Market Quotes	Non Binding Third-Party Valuation	$	3.46		$	24.50		$	10.69
Agency interest only residential mortgage-backed securities	4,421		Option Adjusted Spread ("OAS")	LIBOR OAS⁽²⁾	98			614			389
				Projected Collateral Prepayments	52.6		%	100.0		%	84.6		%
				Projected Collateral Scheduled Amortization	0.0		%	47.4		%	15.4		%
											100.0		%



(continued)	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value		Valuation Technique	Unobservable Input	Min			Max			Weighted Average
	(In thousands)
Credit default swaps on asset-backed securities	10,570		Net Discounted Cash Flows	Projected Collateral Prepayments	26.4		%	56.2		%	32.3		%
				Projected Collateral Losses	16.0		%	37.0		%	28.7		%
				Projected Collateral Recoveries	7.3		%	18.7		%	12.9		%
				Projected Collateral Scheduled Amortization	15.9		%	31.1		%	26.1		%
											100.0		%
Total return swaps	(189	)	Market Quotes	Non Binding Third-Party Valuation ⁽³⁾	$	69.67		$	99.75		$	70.26
Non-exchange traded preferred equity investment in commercial mortgage-related private partnership	8,171		Discounted Cash Flows	Yield	10.0		%	10.0		%	10.0		%
				Expected Holding Period (Months)	14			14			14
Non-exchange traded preferred and common equity investment in mortgage-related entities	7,991		Recent Transactions	Transaction Price	N/A			N/A			N/A


(1)	Includes securitized debt with a fair value of $0.7 million as of March 31, 2015.


(2)	Shown in basis points.


(3)	Represents valuations on underlying assets.

Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and to recent trading activity in the same or similar instruments.

For those instruments valued using discounted and net discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. Averages are weighted based on the fair value of the related instrument. In the case of credit default swaps on asset-backed securities, averages are weighted based on each instrument's bond equivalent value. Bond equivalent value represents the investment amount of a corresponding position in the reference obligation, calculated as the difference between the outstanding principal balance of the underlying reference obligation and the fair value, inclusive of accrued interest, of the derivative contract. For those assets valued using the LIBOR Option Adjusted Spread ("OAS") valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset. The Company considers the expected timeline to resolution in the determination of fair value for its non-performing commercial and residential loans.

Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Additionally, fair value measurements are impacted by the interrelationships of these inputs. For example, for instruments subject to prepayments and credit losses, such as non-Agency RMBS and consumer loans and ABS backed by consumer loans, a higher expectation of collateral prepayments will generally be accompanied by a lower expectation of collateral losses. Conversely, higher losses will generally be accompanied by lower prepayments. Because the Company's credit default swaps on asset-backed security holdings represent credit default swap contracts whereby the Company has purchased credit protection, such credit default swaps on asset-backed securities generally have the directionally opposite sensitivity to prepayments, losses, and recoveries as compared to the Company's long securities holdings. Prepayments do not represent a significant input for the Company's commercial mortgage-backed securities and commercial mortgage loans. Losses and recoveries do not represent a significant input for the Company's Agency RMBS interest only securities, given the guarantee of the issuing government agency or government-sponsored enterprise.

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at December 31, 2014:



(In thousands)
Description	Level 1			Level 2			Level 3			Total
Assets:
Cash and cash equivalents	$	114,140		$	—		$	—		$	114,140
Investments, at fair value-
Agency residential mortgage-backed securities	$	—		$	1,258,699		$	31,385		$	1,290,084
U.S. Treasury securities	—			1,636			—			1,636
Private label residential mortgage-backed securities	—			284,748			274,369			559,117
Private label commercial mortgage-backed securities	—			—			53,311			53,311
Commercial mortgage loans	—			—			28,309			28,309
Residential mortgage loans	—			—			27,482			27,482
Other asset-backed securities and loans	—			—			146,288			146,288
Corporate debt	—			—			42,708			42,708
Real estate owned	—			—			8,635			8,635
Private corporate equity investments	—			—			14,512			14,512
Total investments, at fair value	—			1,545,083			626,999			2,172,082
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	—			—			11,387			11,387
Credit default swaps on corporate bond indices	—			35,865			—			35,865
Credit default swaps on asset-backed indices	—			1,881			—			1,881
Interest rate swaps	—			28,654			—			28,654
Total return swaps	—			8			—			8
Swaptions	—			344			—			344
Options	—			645			—			645
Futures	261			—			—			261
Forwards	—			884			—			884
Warrants	—			—			100			100
Total financial derivatives–assets, at fair value	261			68,281			11,487			80,029
Repurchase agreements	—			172,001			—			172,001
Total investments and financial derivatives–assets, at fair value and repurchase agreements	$	261		$	1,785,365		$	638,486		$	2,424,112
Liabilities:
Investments sold short, at fair value-
Agency residential mortgage-backed securities	$	—		$	(1,209,539	)	$	—		$	(1,209,539	)
Government debt	—			(55,315		)	—			(55,315		)
Common stock	(26,516		)	—			—			(26,516		)
Total investments sold short, at fair value	(26,516		)	(1,264,854		)	—			(1,291,370		)
Financial derivatives–liabilities, at fair value-
Credit default swaps on corporate bond indices	—			(28,588		)	—			(28,588		)
Credit default swaps on corporate bonds	—			(2,953		)	—			(2,953		)
Credit default swaps on asset-backed indices	—			(4,410		)	—			(4,410		)
Credit default swaps on asset-backed securities	—			—			(239		)	(239		)
Interest rate swaps	—			(29,405		)	—			(29,405		)
Total return swaps	—			(21		)	—			(21		)
Options	—			(146		)	—			(146		)



Description	Level 1			Level 2			Level 3			Total
Financial derivatives–liabilities, at fair value (continued)-
Swaptions	—			(137		)	—			(137		)
Futures	(81		)	—			—			(81		)
Forwards	—			(136		)	—			(136		)
Total financial derivatives–liabilities, at fair value	(81		)	(65,796		)	(239		)	(66,116		)
Securitized debt⁽¹⁾	—			—			(774		)	(774		)
Total investments sold short, financial derivatives–liabilities, and securitized debt, at fair value	$	(26,597	)	$	(1,330,650	)	$	(1,013	)	$	(1,358,260	)


(1)	The asset subject to the resecuritization had a fair value of $2.2 million as of December 31, 2014, which is included on the Consolidated Schedule of Investments under Principal and Interest – Private Label Securities.

There were no transfers of financial instruments between Level 1 and Level 2 during the year ended December 31, 2014.

The following table identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of December 31, 2014:



	Fair Value		Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value		Valuation Technique	Unobservable Input	Min			Max			Weighted Average
	(In thousands)
Private label residential mortgage-backed securities ⁽¹⁾	$	201,373	Market Quotes	Non Binding Third-Party Valuation	$	1.83		$	119.58		$	73.58
Other asset-backed securities	123,029		Market Quotes	Non Binding Third-Party Valuation	21.50			137.00			94.91
Private label residential mortgage-backed securities	72,222		Discounted Cash Flows	Yield	3.0		%	13.6		%	7.0		%
				Projected Collateral Prepayments	6.7		%	100.0		%	45.6		%
				Projected Collateral Losses	0.0		%	44.5		%	11.3		%
				Projected Collateral Recoveries	0.0		%	22.4		%	8.0		%
				Projected Collateral Scheduled Amortization	0.0		%	86.4		%	35.1		%
											100.0		%
Private label commercial mortgage-backed securities	12,392		Discounted Cash Flows	Yield	12.0		%	51.1		%	23.7		%
				Projected Collateral Losses	0.1		%	2.5		%	0.7		%
				Projected Collateral Recoveries	0.9		%	13.5		%	6.2		%
				Projected Collateral Scheduled Amortization	85.3		%	99.0		%	93.1		%
											100.0		%
Corporate debt, non-exchange traded corporate equity, and warrants	45,668		Discounted Cash Flows	Yield	7.5		%	24.3		%	13.3		%
				Non Binding Third-Party Valuation	73.00			108.00			95.08
Other asset-backed securities and loans	23,259		Discounted Cash Flows	Yield	0.0		%	14.4		%	9.1		%
				Projected Collateral Prepayments	62.7		%	62.7		%	62.7		%
				Projected Collateral Losses	4.0		%	4.0		%	4.0		%
				Projected Collateral Recoveries	1.7		%	1.7		%	1.7		%
				Projected Collateral Scheduled Amortization	31.6		%	31.6		%	31.6		%
											100.0		%



	Fair Value	Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value	Valuation Technique	Unobservable Input	Min			Max			Weighted Average
(continued)	(In thousands)
Private label commercial mortgage-backed securities	40,919	Market Quotes	Non Binding Third-Party Valuation	$	5.62		$	103.25		$	66.56
Performing commercial mortgage loans	21,328	Discounted Cash Flows	Yield	9.2		%	13.1		%	10.3		%
Non-performing commercial mortgage loans	6,981	Discounted Cash Flows	Yield	15.3		%	20.1		%	16.4		%
			Months to Resolution	0.5			10.5			8.2
Non-performing residential mortgage loan pools and real estate owned	36,117	Discounted Cash Flows	Yield	6.1		%	12.0		%	7.3		%
			Months to Resolution	4.1			79.1			24.6
Agency interest only residential mortgage-backed securities	22,928	Market Quotes	Non Binding Third-Party Valuation	$	3.62		$	24.86		$	11.38
Agency interest only residential mortgage-backed securities	8,457	Option Adjusted Spread ("OAS")	LIBOR OAS⁽²⁾	(154		)	1,796			359
			Projected Collateral Prepayments	50.2		%	100.0		%	75.5		%
			Projected Collateral Scheduled Amortization	0.0		%	49.8		%	24.5		%
										100.0		%
Credit default swaps on asset-backed securities	11,148	Net Discounted Cash Flows	Projected Collateral Prepayments	17.8		%	55.8		%	32.5		%
			Projected Collateral Losses	16.5		%	37.7		%	29.7		%
			Projected Collateral Recoveries	7.7		%	18.5		%	12.8		%
			Projected Collateral Scheduled Amortization	15.9		%	43.4		%	25.0		%
										100.0		%
Non-exchange traded preferred equity investment in commercial mortgage-related private partnership	6,241	Discounted Cash Flows	Yield	10.0		%	10.0		%	10.0		%
			Expected Holding Period (Months)	17			17			17
Non-exchange traded preferred and common equity investment in mortgage-related entities	5,411	Recent Transactions	Transaction Price	N/A			N/A			N/A


(1)	Includes securitized debt with a fair value of $0.8 million as of December 31, 2014.


(2)	Shown in basis points.

For those instruments valued using discounted and net discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. Averages are weighted based on the fair value of the related instrument. In the case of credit default swaps on asset-backed securities, averages are weighted based on each instrument's bond equivalent value. Bond equivalent value represents the investment amount of a corresponding position in the reference obligation, calculated as the difference between the outstanding principal balance of the underlying reference obligation and the fair value, inclusive of accrued interest, of the derivative contract. For those assets valued using the LIBOR Option Adjusted Spread valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset.

Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Additionally, fair value measurements are impacted by the interrelationships of these inputs. For example, a higher expectation of collateral prepayments will generally be accompanied by a lower expectation of collateral losses. Conversely, higher losses will generally be accompanied by lower prepayments. Because the Company's credit default swaps on asset-backed security holdings represent credit default swap contracts whereby the Company has purchased credit protection, such default swaps on asset-backed securities generally have the directionally opposite sensitivity to prepayments, losses, and recoveries as compared to the Company's long securities holdings. Prepayments do not represent a significant input for the Company's commercial mortgage-backed securities and commercial mortgage loans. Losses and recoveries do not represent a significant input for the Company's Agency RMBS interest only securities, given the guarantee of the issuing government agency or government-sponsored enterprise.

The tables below include a roll-forward of the Company's financial instruments for the three month periods ended March 31, 2015 and 2014 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

Level 3—Fair Value Measurement Using Significant Unobservable Inputs:

Three Month Period Ended March 31, 2015



(In thousands)	Ending Balance as of December 31, 2014			Accreted Discounts / (Amortized Premiums)			Net Realized Gain/ (Loss)			Change in Net Unrealized Gain/(Loss)			Purchases/ Payments		Sales/ Issuances			Transfers Into Level 3		Transfers Out of Level 3			Ending Balance as of March 31, 2015
Assets:
Investments, at fair value-
Agency residential mortgage-backed securities	$	31,385		$	(2,006	)	$	471		$	(96	)	$	1,190	$	(4,609	)	$	—	$	—		$	26,335
Private label residential mortgage-backed securities	274,369			2,388			1,206			3,062			6,633		(39,423		)	23,221		(102,085		)	169,371
Private label commercial mortgage-backed securities	53,311			1,372			614			(1,900		)	15,594		(16,777		)	—		—			52,214
Commercial mortgage loans	28,309			539			—			17			24,291		(14,238		)	—		—			38,918
Residential mortgage loans	27,482			443			242			144			5,976		(3,442		)	—		—			30,845
Other asset-backed securities and loans	146,288			(6,340		)	772			(1,154		)	26,534		(42,480		)	—		—			123,620
Corporate debt	42,708			31			186			(580		)	11,605		(22,114		)	—		—			31,836
Real estate owned	8,635			—			84			537			2,471		(2,657		)	—		—			9,070
Private corporate equity investments	14,512			—			—			230			6,572		(14		)	—		—			21,300
Total investments, at fair value	626,999			(3,573		)	3,575			260			100,866		(145,754		)	23,221		(102,085		)	503,509
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	11,387			—			401			(355		)	22		(646		)	—		—			10,809
Total return swaps	—			—			—			118			—		—			—		—			118
Warrants	100			—			—			—			—		—			—		—			100
Total financial derivatives– assets, at fair value	11,487			—			401			(237		)	22		(646		)	—		—			11,027
Total investments and financial derivatives–assets, at fair value	$	638,486		$	(3,573	)	$	3,976		$	23		$	100,888	$	(146,400	)	$	23,221	$	(102,085	)	$	514,536
Liabilities:
Financial derivatives–liabilities, at fair value-
Credit default swaps on asset-backed securities	$	(239	)	$	—		$	(19	)	$	—		$	—	$	19		$	—	$	—		$	(239	)
Total return swaps	—			—			—			(307		)	—		—			—		—			(307		)
Total financial derivatives– liabilities, at fair value	(239		)	—			(19		)	(307		)	—		19			—		—			(546		)
Securitized debt:
Securitized debt	(774		)	(2		)	—			19			88		—			—		—			(669		)
Total securitized debt	(774		)	(2		)	—			19			88		—			—		—			(669		)
Total financial derivatives– liabilities and securitized debt, at fair value	$	(1,013	)	$	(2	)	$	(19	)	$	(288	)	$	88	$	19		$	—	$	—		$	(1,215	)

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2015, as well as Level 3 financial instruments disposed of by the Company during the three month period ended March 31, 2015. For Level 3 financial instruments held by the Company at March 31, 2015, change in net unrealized gain (loss) of $(3.2) million, $(0.2) million, $(0.3) million, and $19.0 thousand, for the three month period ended March 31, 2015 relate to investments, financial derivatives–assets, financial derivatives–liabilities, and securitized debt, respectively.

As of March 31, 2015, the Company transferred $102.1 million of non-Agency RMBS from Level 3 to Level 2. These assets were transferred from Level 3 to Level 2 based on an increased volume of observed trading of these and similar assets. This increase in observed trading activity has led to greater price transparency for these assets, thereby making a Level 2 designation appropriate in the Company's view. However, changes in the volume of observable inputs for these assets, such as a decrease in the volume of observed trading, could impact price transparency, and thereby cause a change in the level designation for these assets in future periods.

In addition, as of March 31, 2015, the Company transferred $23.2 million of non-Agency RMBS from Level 2 to Level 3. Since year end, these securities have exhibited indications of a reduced level of price transparency. Examples of such indications include wider spreads relative to similar securities and a reduction in observable transactions involving these and similar securities. Changes in these indications could impact price transparency, and thereby cause a change in the level designation in future periods.

Level 3—Fair Value Measurement Using Significant Unobservable Inputs:

Three Month Period Ended March 31, 2014



(In thousands)	Ending Balance as of December 31, 2013			Accreted Discounts / (Amortized Premiums)			Net Realized Gain/ (Loss)			Change in Net Unrealized Gain/(Loss)			Purchases/ Payments		Sales/ Issuances			Transfers Into Level 3		Transfers Out of Level 3		Ending Balance as of March 31, 2014
Assets:
Investments, at fair value-
Agency residential mortgage-backed securities	$	40,504		$	(2,289	)	$	35		$	751		$	2,554	$	(180	)	$	—	$	—	$	41,375
Private label residential mortgage-backed securities	580,772			5,385			23,460			(12,852		)	89,585		(196,267		)	—		—		490,083
Private label commercial mortgage-backed securities	32,994			205			872			1,515			37,769		(40,710		)	—		—		32,645
Commercial mortgage loans	23,887			563			2			(460		)	20,023		(10		)	—		—		44,005
Residential mortgage loans	24,062			—			18			(260		)	—		(254		)	—		—		23,566
Other asset-backed securities	38,069			159			(97		)	548			13,887		(5,108		)	—		—		47,458
Real estate owned	—			—			—			(4		)	101		—			—		—		97
Total investments, at fair value	740,288			4,023			24,290			(10,762		)	163,919		(242,529		)	—		—		679,229
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	16,646			—			1,190			(1,210		)	39		(1,491		)	—		—		15,174
Total financial derivatives– assets, at fair value	16,646			—			1,190			(1,210		)	39		(1,491		)	—		—		15,174
Total investments and financial derivatives–assets, at fair value	$	756,934		$	4,023		$	25,480		$	(11,972	)	$	163,958	$	(244,020	)	$	—	$	—	$	694,403
Liabilities:
Financial derivatives– liabilities, at fair value-
Credit default swaps on asset-backed securities	$	(350	)	$	—		$	(19	)	$	—		$	—	$	19		$	—	$	—	$	(350	)
Total financial derivatives– liabilities, at fair value	(350		)	—			(19		)	—			—		19			—		—		(350		)
Securitized debt:
Securitized debt	(983		)	(7		)	—			(17		)	24		—			—		—		(983		)
Total securitized debt	(983		)	(7		)	—			(17		)	24		—			—		—		(983		)
Total financial derivatives– liabilities and securitized debt, at fair value	$	(1,333	)	$	(7	)	$	(19	)	$	(17	)	$	24	$	19		$	—	$	—	$	(1,333	)

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2014, as well as Level 3 financial instruments disposed of by the Company during the three month period ended March 31, 2014. For Level 3 financial instruments held by the Company at March 31, 2014, change in net unrealized gain (loss) of $2.3 million, $(1.2) million, and $(17.0) thousand for the three month period ended March 31, 2014 relate to investments, financial derivatives–assets, and securitized debt, respectively.