Valuation (Tables)

12 Months Ended

Dec. 31, 2017

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at December 31, 2017:



Description	Level 1			Level 2			Level 3		Total
Assets:	(In thousands)
Cash equivalents	$	26,500		$	—		$	—	$	26,500
Investments, at fair value-
Agency residential mortgage-backed securities	$	—		$	989,341		$	6,173	$	995,514
Private label residential mortgage-backed securities	—			158,369			101,297		259,666
Private label commercial mortgage-backed securities	—			28,398			12,347		40,745
Commercial mortgage loans	—			—			108,301		108,301
Residential mortgage loans	—			—			182,472		182,472
Collateralized loan obligations	—			185,905			24,911		210,816
Consumer loans and asset-backed securities backed by consumer loans	—			—			135,258		135,258
Corporate debt	—			51,246			23,947		75,193
Real estate owned	—			—			26,277		26,277
Corporate equity investments	—			—			37,465		37,465
Total investments, at fair value	—			1,413,259			658,448		2,071,707
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	—			—			3,140		3,140
Credit default swaps on corporate bond indices	—			1,429			—		1,429
Credit default swaps on corporate bonds	—			8,888			—		8,888
Credit default swaps on asset-backed indices	—			5,393			—		5,393
Interest rate swaps	—			9,266			—		9,266
Options	3			1			—		4
Futures	45			—			—		45
Total financial derivatives–assets, at fair value	48			24,977			3,140		28,165
Repurchase agreements, at fair value	—			155,949			—		155,949
Total investments, financial derivatives–assets, and repurchase agreements, at fair value	$	48		$	1,594,185		$	661,588	$	2,255,821
Liabilities:
Investments sold short, at fair value-
Agency residential mortgage-backed securities	$	—		$	(460,189	)	$	—	$	(460,189	)
Government debt	—			(90,149		)	—		(90,149		)
Corporate debt	—			(55,211		)	—		(55,211		)
Common stock	(36,691		)	—			—		(36,691		)
Total investments sold short, at fair value	(36,691		)	(605,549		)	—		(642,240		)



Description	Level 1			Level 2			Level 3			Total
(continued)	(In thousands)
Financial derivatives–liabilities, at fair value-
Credit default swaps on corporate bond indices	$	—		$	(12,367	)	$	—		$	(12,367	)
Credit default swaps on corporate bonds	—			(15,930		)	—			(15,930		)
Credit default swaps on asset-backed indices	—			(980		)	—			(980		)
Interest rate swaps	—			(6,015		)	—			(6,015		)
Futures	(508		)	—			—			(508		)
Forwards	—			(473		)	—			(473		)
Total financial derivatives–liabilities, at fair value	(508		)	(35,765		)	—			(36,273		)
Other secured borrowings, at fair value	$	—		$	—		$	(125,105	)	$	(125,105	)
Total investments sold short, financial derivatives–liabilities, and other secured borrowings, at fair value	$	(37,199	)	$	(641,314	)	$	(125,105	)	$	(803,618	)

The table below reflects the value of the Company's Level 1, Level 2, and Level 3 financial instruments at December 31, 2016:



Description	Level 1		Level 2		Level 3		Total
Assets:	(In thousands)
Cash equivalents	$	90,000	$	—	$	—	$	90,000
Investments, at fair value-
Agency residential mortgage-backed securities	$	—	$	868,345	$	29,622	$	897,967
U.S. Treasury securities	—		5,419		—		5,419
Private label residential mortgage-backed securities	—		53,525		90,083		143,608
Private label commercial mortgage-backed securities	—		—		43,268		43,268
Commercial mortgage loans	—		—		61,129		61,129
Residential mortgage loans	—		—		84,290		84,290
Collateralized loan obligations	—		—		44,956		44,956
Consumer loans and asset-backed securities backed by consumer loans⁽¹⁾	—		—		107,157		107,157
Corporate debt	—		55,091		25,004		80,095
Real estate owned	—		—		3,349		3,349
Corporate equity investments⁽¹⁾	4,396		—		29,392		33,788
Total investments, at fair value	4,396		982,380		518,250		1,505,026



Description	Level 1			Level 2			Level 3			Total
(continued)	(In thousands)
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	$	—		$	—		$	5,326		$	5,326
Credit default swaps on corporate bond indices	—			2,744			—			2,744
Credit default swaps on corporate bonds	—			2,360			—			2,360
Credit default swaps on asset-backed indices	—			16,713			—			16,713
Interest rate swaps	—			8,102			—			8,102
Total return swaps	—			—			155			155
Options	42			2			—			44
Futures	29			—			—			29
Forwards	—			16			—			16
Warrants	—			—			106			106
Total financial derivatives–assets, at fair value	71			29,937			5,587			35,595
Repurchase agreements, at fair value	—			184,819			—			184,819
Total investments, financial derivatives–assets, and repurchase agreements, at fair value	$	4,467		$	1,197,136		$	523,837		$	1,725,440
Liabilities:
Investments sold short, at fair value-
Agency residential mortgage-backed securities	$	—		$	(404,728	)	$	—		$	(404,728	)
Government debt	—			(132,442		)	—			(132,442		)
Corporate debt	—			(39,572		)	—			(39,572		)
Common stock	(8,154		)	—			—			(8,154		)
Total investments sold short, at fair value	(8,154		)	(576,742		)	—			(584,896		)
Financial derivatives–liabilities, at fair value-
Credit default swaps on corporate bond indices	—			(2,840		)	—			(2,840		)
Credit default swaps on corporate bonds	—			(6,654		)	—			(6,654		)
Credit default swaps on asset-backed indices	—			(2,899		)	—			(2,899		)
Credit default swaps on asset-backed securities	—			—			(256		)	(256		)
Interest rate swaps	—			(5,162		)	—			(5,162		)
Total return swaps	—			(55		)	(249		)	(304		)
Futures	(69		)	—			—			(69		)
Forwards	—			(472		)	—			(472		)
Mortgage loan purchase commitments	—			(31		)	—			(31		)
Total financial derivatives–liabilities, at fair value	(69		)	(18,113		)	(505		)	(18,687		)
Total investments sold short and financial derivatives–liabilities, at fair value	$	(8,223	)	$	(594,855	)	$	(505	)	$	(603,583	)

Schedule Of Significant Unobservable Inputs, Qualitative Information

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, 2017:



	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	$	40,870	Market Quotes	Non Binding Third-Party Valuation	$	45.00		$	183.00		$	81.63
Collateralized loan obligations	10,288		Market Quotes	Non Binding Third-Party Valuation	85.00			435.00			138.94
Corporate debt and non-exchange traded corporate equity	6,797		Market Quotes	Non Binding Third-Party Valuation	8.88			105.63			82.94
Private label commercial mortgage-backed securities	7,577		Market Quotes	Non Binding Third-Party Valuation	5.31			60.55			36.19
Agency interest only residential mortgage-backed securities	1,225		Market Quotes	Non Binding Third-Party Valuation	10.14			18.21			15.25
Private label residential mortgage-backed securities	60,427		Discounted Cash Flows	Yield	0.5		%	26.5		%	9.8		%
				Projected Collateral Prepayments	2.1		%	84.7		%	38.3		%
				Projected Collateral Losses	0.9		%	18.2		%	8.6		%
				Projected Collateral Recoveries	0.3		%	31.5		%	11.3		%
				Projected Collateral Scheduled Amortization	12.5		%	90.2		%	41.8		%
											100.0		%
Private label commercial mortgage-backed securities	4,770		Discounted Cash Flows	Yield	4.3		%	42.5		%	18.6		%
				Projected Collateral Losses	1.1		%	5.2		%	2.5		%
				Projected Collateral Recoveries	2.8		%	17.1		%	8.5		%
				Projected Collateral Scheduled Amortization	80.1		%	96.1		%	89.0		%
											100.0		%
Corporate debt and non-exchange traded corporate equity	20,301		Discounted Cash Flows	Yield	3.0		%	16.1		%	10.6		%



(continued)	Fair Value			Valuation Technique	Unobservable Input	Range						Weighted Average
Description	Fair Value			Valuation Technique	Unobservable Input	Min			Max			Weighted Average
	(In thousands)
Collateralized loan obligations	$	14,623		Discounted Cash Flows	Yield	7.1		%	62.2		%	15.2		%
					Projected Collateral Prepayments	22.5		%	92.9		%	77.9		%
					Projected Collateral Losses	1.9		%	40.2		%	10.3		%
					Projected Collateral Recoveries	3.4		%	37.2		%	9.5		%
					Projected Collateral Scheduled Amortization	—		%	4.1		%	2.3		%
												100.0		%
Consumer loans and asset-backed securities backed by consumer loans	135,258			Discounted Cash Flows	Yield	7.0		%	18.9		%	9.5		%
					Projected Collateral Prepayments	2.2		%	50.1		%	33.5		%
					Projected Collateral Losses	0.4		%	28.6		%	8.2		%
					Projected Collateral Scheduled Amortization	46.8		%	95.2		%	58.3		%
												100.0		%
Performing commercial mortgage loans	84,377			Discounted Cash Flows	Yield	8.0		%	15.4		%	10.7		%
Non-performing commercial mortgage loans and commercial real estate owned	49,610			Discounted Cash Flows	Yield	11.4		%	36.5		%	17.7		%
					Months to Resolution	4.0			17.0			9.5
Performing residential mortgage loans	42,030			Discounted Cash Flows	Yield	1.6		%	18.8		%	6.2		%
Securitized residential mortgage loans⁽¹⁾	132,424			Discounted Cash Flows	Yield	3.5		%	3.5		%	3.5		%
Non-performing residential mortgage loans and residential real estate owned	8,609			Discounted Cash Flows	Yield	2.8		%	34.5		%	8.9		%
					Months to Resolution⁽²⁾	1.9			40.5			25.6
Credit default swaps on asset-backed securities	3,140			Net Discounted Cash Flows	Projected Collateral Prepayments	19.8		%	26.5		%	22.4		%
					Projected Collateral Losses	14.6		%	23.8		%	19.7		%
					Projected Collateral Recoveries	5.8		%	14.3		%	10.6		%
					Projected Collateral Scheduled Amortization	45.5		%	51.0		%	47.3		%
												100.0		%
Agency interest only residential mortgage-backed securities	4,948			Option Adjusted Spread ("OAS")	LIBOR OAS⁽³⁾	381			3,521			730
					Projected Collateral Prepayments	51.2		%	100.0		%	69.1		%
					Projected Collateral Scheduled Amortization	0.0		%	48.8		%	30.9		%
												100.0		%
Non-exchange traded common equity investment in mortgage-related entity	2,814			Enterprise Value	Equity Price-to-Book⁽⁴⁾	2.0x			2.0x			2.0x
Non-exchange traded preferred equity investment in mortgage-related entity	20,774			Enterprise Value	Equity Price-to-Book⁽⁴⁾	0.9x			0.9x			0.9x
Non-controlling equity interest in limited liability company	5,033			Market Quotes	Non Binding Third-Party Valuation of the Underlying Assets⁽⁵⁾	$	96.91		$	96.91		$	96.91
Non-controlling equity interest in limited liability company	5,693			Discounted Cash Flows	Yield⁽⁵⁾	9.1%			9.1%			9.1%
Other secured borrowings, at fair value⁽¹⁾	(125,105		)	Discounted Cash Flows	Yield	2.8%			2.8%			2.8%


(1)	Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFE as discussed in Note 2.


(2)	Excludes certain loans that are re-performing.


(3)	Shown in basis points.


(4)	Represent an estimation of where market participants might value an enterprise on a price-to-book basis.


(5)	Represents the significant unobservable inputs used to fair value the financial instruments of the limited liability company. The fair value of such financial instruments is the largest component of the valuation of the limited liability company as a whole.

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, 2016:



	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	$	47,024		Market Quotes	Non Binding Third-Party Valuation	$	2.00		$	101.02		$	67.51
Collateralized loan obligations	37,517			Market Quotes	Non Binding Third-Party Valuation	9.42			100.25			83.36
Corporate debt and non-exchange traded corporate equity	19,017			Market Quotes	Non Binding Third-Party Valuation	1.88			102.25			87.14
Private label commercial mortgage-backed securities	27,283			Market Quotes	Non Binding Third-Party Valuation	5.17			77.75			40.88
Agency interest only residential mortgage-backed securities	23,322			Market Quotes	Non Binding Third-Party Valuation	2.47			20.17			11.65
Total return swaps	(94		)	Market Quotes	Non Binding Third-Party Valuation ⁽¹⁾	98.25			99.50			98.77
Private label residential mortgage-backed securities	43,059			Discounted Cash Flows	Yield	0.6		%	20.5		%	11.0		%
					Projected Collateral Prepayments	0.0		%	81.0		%	10.0		%
					Projected Collateral Losses	1.4		%	51.2		%	41.4		%
					Projected Collateral Recoveries	0.4		%	53.6		%	41.2		%
					Projected Collateral Scheduled Amortization	0.0		%	90.7		%	7.4		%
												100.0		%
Private label commercial mortgage-backed securities	15,985			Discounted Cash Flows	Yield	8.8		%	57.0		%	23.6		%
					Projected Collateral Losses	0.1		%	5.3		%	2.2		%
					Projected Collateral Recoveries	0.9		%	20.5		%	10.7		%
					Projected Collateral Scheduled Amortization	77.8		%	99.0		%	87.1		%
												100.0		%
Corporate debt and warrants	10,080			Discounted Cash Flows	Yield	19.7		%	19.7		%	19.7		%
Collateralized loan obligations	7,439			Discounted Cash Flows	Yield	11.2		%	50.3		%	20.5		%
					Projected Collateral Prepayments	11.4		%	55.2		%	45.5		%
					Projected Collateral Losses	4.5		%	28.3		%	10.7		%
					Projected Collateral Recoveries	1.5		%	27.2		%	8.6		%
					Projected Collateral Scheduled Amortization	29.8		%	51.5		%	35.2		%
												100.0		%
Consumer loans and asset-backed securities backed by consumer loans⁽²⁾	107,157			Discounted Cash Flows	Yield	9.0		%	25.0		%	11.0		%
					Projected Collateral Prepayments	0.0		%	45.4		%	25.6		%
					Projected Collateral Losses	3.3		%	97.4		%	9.4		%
					Projected Collateral Scheduled Amortization	0.0		%	87.7		%	65.0		%
												100.0		%
Performing commercial mortgage loans	32,557			Discounted Cash Flows	Yield	8.0		%	17.2		%	11.6		%



(continued)	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
Description	Fair Value		Valuation Technique	Unobservable Input	Min		Max		Weighted Average
	(In thousands)
Non-performing commercial mortgage loans and commercial real estate owned	$	30,222	Discounted Cash Flows	Yield	10.2	%	27.8	%	16.3	%
				Months to Resolution	3.0		39.1		19.5
Performing residential mortgage loans	78,576		Discounted Cash Flows	Yield	5.0	%	13.5	%	6.6	%
Non-performing residential mortgage loans and residential real estate owned	7,413		Discounted Cash Flows	Yield	5.8	%	39.9	%	9.7	%
				Months to Resolution	1.8		162.9		41.9
Credit default swaps on asset-backed securities	5,070		Net Discounted Cash Flows	Projected Collateral Prepayments	19.3	%	29.8	%	22.7	%
				Projected Collateral Losses	15.3	%	27.6	%	22.2	%
				Projected Collateral Recoveries	4.7	%	15.3	%	8.7	%
				Projected Collateral Scheduled Amortization	43.2	%	50.2	%	46.4	%
									100.0	%
Non-exchange traded equity investments in commercial mortgage-related private partnerships	3,090		Discounted Cash Flows	Yield	16.5	%	16.5	%	16.5	%
				Expected Holding Period (Months)	2.9		2.9		2.9
Agency interest only residential mortgage-backed securities	6,300		Option Adjusted Spread ("OAS")	LIBOR OAS⁽³⁾	142		2,831		568
				Projected Collateral Prepayments⁽²⁾	0.0	%	100.0	%	63.6	%
				Projected Collateral Scheduled Amortization	0.0	%	88.1	%	36.4	%
									100.0	%
Non-exchange traded preferred and common equity investment in mortgage-related entity	2,500		Enterprise Value	Equity Price-to-Book⁽⁴⁾	1.3x		1.3x		1.3x
Non-controlling equity interest in limited liability company⁽²⁾	7,315		Net Discounted Cash Flows	Yield	8.5	%	8.5	%	8.5	%
Non-exchange traded preferred equity investment in mortgage-related entity	12,500		Recent Transactions	Transaction Price	N/A		N/A		N/A


(1)	Represents valuations on underlying assets.


(2)	Conformed to current period presentation.


(3)	Shown in basis points.


(4)	Represent an estimation of where market participants might value an enterprise on a price-to-book basis.

Fair Value Measurement Using Significant Unobservable Inputs

The tables below include a roll-forward of the Company's financial instruments for the years ended December 31, 2017, 2016, and 2015 (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:

Year Ended December 31, 2017



(In thousands)	Ending Balance as of December 31, 2016		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 December 31, 2017
Assets:
Investments, at fair value-
Agency residential mortgage-backed securities	$	29,622	$	(9,356	)	$	(956	)	$	(165	)	$	3,867	$	(153	)	$	—	$	(16,686	)	$	6,173
Private label residential mortgage-backed securities	90,083		2,203			763			9,498			68,724		(54,690		)	14,021		(29,305		)	101,297
Private label commercial mortgage-backed securities	43,268		469			(3,596		)	8,654			6,661		(37,665		)	—		(5,444		)	12,347
Commercial mortgage loans	61,129		921			419			1,957			78,333		(34,458		)	—		—			108,301
Residential mortgage loans	84,290		(599		)	1,602			3,536			140,535		(46,892		)	—		—			182,472
Collateralized loan obligations	44,956		(6,833		)	2,233			2,606			71,338		(76,775		)	—		(12,614		)	24,911
Consumer loans and asset-backed securities backed by consumer loans	107,157		(13,754		)	855			(171		)	129,525		(88,354		)	—		—			135,258
Corporate debt	25,004		252			527			223			97,466		(99,525		)	—		—			23,947
Real estate owned	3,349		—			411			322			25,516		(3,321		)	—		—			26,277
Corporate equity investments	29,392		—			2,347			(512		)	16,417		(10,179		)	—		—			37,465
Total investments, at fair value	518,250		(26,697		)	4,605			25,948			638,382		(452,012		)	14,021		(64,049		)	658,448
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	5,326		—			270			(1,202		)	137		(1,391		)	—		—			3,140
Total return swaps	155		—			224			(155		)	1		(225		)	—		—			—
Warrants	106		—			(100		)	(6		)	—		—			—		—			—
Total financial derivatives– assets, at fair value	5,587		—			394			(1,363		)	138		(1,616		)	—		—			3,140
Total investments and financial derivatives–assets, at fair value	$	523,837	$	(26,697	)	$	4,999		$	24,585		$	638,520	$	(453,628	)	$	14,021	$	(64,049	)	$	661,588



(In thousands)	Ending Balance as of December 31, 2016			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 December 31, 2017
Liabilities:
Financial derivatives–liabilities, at fair value-
Credit default swaps on asset-backed securities	$	(256	)	$	—	$	(871	)	$	939	$	736	$	(548	)	$	—	$	—	$	—
Total return swaps	(249		)	—		(554		)	249		572		(18		)	—		—		—
Total financial derivatives– liabilities, at fair value	(505		)	—		(1,425		)	1,188		1,308		(566		)	—		—		—
Other secured borrowings, at fair value:
Other secured borrowings, at fair value	—			—		—			—		—		(125,105		)	—		—		(125,105		)
Total other secured borrowings, at fair value	—			—		—			—		—		(125,105		)	—		—		(125,105		)
Total financial derivatives– liabilities and other secured borrowings at fair value	$	(505	)	$	—	$	(1,425	)	$	1,188	$	1,308	$	(125,671	)	$	—	$	—	$	(125,105	)

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 December 31, 2017, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2017. For Level 3 financial instruments held by the Company at December 31, 2017, change in net unrealized gain (loss) of $10.6 million and $(1.2) million for the year ended December 31, 2017 relate to investments and financial derivatives–assets, respectively.

As of June 30, 2017, the Company modified its procedures to determine the level within the hierarchy for certain financial instruments. Under the revised procedure, the Company examines financial instruments individually rather than in cohorts of like instruments as it had previously. As of December 31, 2017, the Company transferred $64.0 million of securities from Level 3 to Level 2 and $14.0 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.

Year Ended December 31, 2016



(In thousands)	Ending Balance as of December 31, 2015			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 December 31, 2016
Assets:
Investments, at fair value-
Agency residential mortgage-backed securities	$	24,918		$	(7,998	)	$	(536	)	$	845		$	12,665	$	(272	)	$	—	$	—		$	29,622
Private label residential mortgage-backed securities	116,435			1,896			(2,748		)	3,972			30,065		(55,407		)	10,041		(14,171		)	90,083
Private label commercial mortgage-backed securities	34,145			1,627			1,008			(6,081		)	24,488		(11,919		)	—		—			43,268
Commercial mortgage loans	66,399			2,463			1,920			(1,434		)	39,684		(47,903		)	—		—			61,129
Residential mortgage loans	22,089			467			774			(800		)	102,224		(40,464		)	—		—			84,290
Collateralized loan obligations	45,974			(3,829		)	71			2,471			27,862		(27,593		)	—		—			44,956
Consumer loans and asset-backed securities backed by consumer loans⁽¹⁾	115,376			(10,668		)	(164		)	(3,711		)	154,101		(147,777		)	—		—			107,157
Corporate debt	27,028			(60		)	(8,326		)	6,864			26,851		(27,353		)	—		—			25,004
Real estate owned	12,522			—			2,256			(458		)	17,526		(28,497		)	—		—			3,349
Corporate equity investments⁽¹⁾	22,088			—			(144		)	(3,075		)	44,680		(34,157		)	—		—			29,392
Total investments, at fair value	486,974			(16,102		)	(5,889		)	(1,407		)	480,146		(421,342		)	10,041		(14,171		)	518,250
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	6,332			—			1,042			(667		)	148		(1,529		)	—		—			5,326
Total return swaps	85			—			3,070			70			57		(3,127		)	—		—			155
Warrants	150			—			(50		)	6			7,486		(7,486		)	—		—			106
Total financial derivatives– assets, at fair value	6,567			—			4,062			(591		)	7,691		(12,142		)	—		—			5,587
Total investments and financial derivatives–assets, at fair value	$	493,541		$	(16,102	)	$	(1,827	)	$	(1,998	)	$	487,837	$	(433,484	)	$	10,041	$	(14,171	)	$	523,837
Liabilities:
Investments sold short, at fair value
Corporate debt	$	(448	)	$	(1	)	$	362		$	(228	)	$	315	$	—		$	—	$	—		$	—
Total investments sold short, at fair value	(448		)	(1		)	362			(228		)	315		—			—		—			—
Financial derivatives– liabilities, at fair value-
Credit default swaps on asset-backed securities	(221		)	—			(323		)	(36		)	324		—			—		—			(256		)
Total return swaps	(4,662		)	—			(7,534		)	4,413			8,214		(680		)	—		—			(249		)
Total financial derivatives– liabilities, at fair value	(4,883		)	—			(7,857		)	4,377			8,538		(680		)	—		—			(505		)
Guarantees:
Guarantees	(828		)	—			—			828			—		—			—		—			—
Total guarantees	(828		)	—			—			828			—		—			—		—			—
Total investments sold short, financial derivatives–liabilities, and guarantees, at fair value	$	(6,159	)	$	(1	)	$	(7,495	)	$	4,977		$	8,853	$	(680	)	$	—	$	—		$	(505	)


(1)	Conformed to current period presentation.

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 December 31, 2016, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2016. For Level 3 financial instruments held by the Company at December 31, 2016, change in net unrealized gain (loss) of $(14.7) million, $(0.8) million, and $(0.2) million, for the year ended December 31, 2016 relate to investments, financial derivatives–assets, and financial derivatives–liabilities, respectively.

As of December 31, 2016, the Company transferred $14.2 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 led to greater price transparency for these assets, thereby making a Level 2 designation appropriate in the Company's view.

In addition, as of December 31, 2016, the Company transferred $10.0 million of non-Agency RMBS from Level 2 to Level 3. Since December 31, 2015, these securities 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.

Year Ended December 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 December 31, 2015
Assets:
Investments, at fair value-
Agency residential mortgage-backed securities	$	31,385	$	(8,355	)	$	223		$	81		$	6,977	$	(5,393	)	$	—	$	—		$	24,918
Private label residential mortgage-backed securities	274,369		8,593			20,648			(16,429		)	62,994		(191,902		)	6,687		(48,525		)	116,435
Private label commercial mortgage-backed securities	53,311		3,076			2,000			(4,183		)	21,382		(41,441		)	—		—			34,145
Commercial mortgage loans	28,309		1,895			1,114			(142		)	69,778		(34,555		)	—		—			66,399
Residential mortgage loans	27,482		1,363			2,372			(505		)	19,555		(28,178		)	—		—			22,089
Collateralized loan obligations	121,994		(21,110		)	46			(4,033		)	59,102		(110,025		)	—		—			45,974
Consumer loans and asset-backed securities backed by consumer loans	24,294		(6,197		)	—			283			139,373		(42,377		)	—		—			115,376
Corporate debt	42,708		60			(4,028		)	(6,882		)	28,942		(33,772		)	—		—			27,028
Real estate owned	8,635		—			1,168			381			14,155		(11,817		)	—		—			12,522
Private corporate equity investments	14,512		—			116			(306		)	8,347		(581		)	—		—			22,088
Total investments, at fair value	626,999		(20,675		)	23,659			(31,735		)	430,605		(500,041		)	6,687		(48,525		)	486,974
Financial derivatives–assets, at fair value-
Credit default swaps on asset-backed securities	$	11,387	$	—		$	(2,964	)	$	2,098		$	28	$	(4,217	)	$	—	$	—		$	6,332
Total return swaps	—		—			113			85			—		(113		)	—		—			85
Warrants	100		—			—			—			50		—			—		—			150
Total financial derivatives– assets, at fair value	11,487		—			(2,851		)	2,183			78		(4,330		)	—		—			6,567
Total investments and financial derivatives–assets, at fair value	$	638,486	$	(20,675	)	$	20,808		$	(29,552	)	$	430,683	$	(504,371	)	$	6,687	$	(48,525	)	$	493,541



(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 December 31, 2015
Liabilities:
Investments sold short, at fair value
Corporate debt	$	—		$	(2	)	$	197		$	228		$	1,372	$	(2,243	)	$	—	$	—	$	(448	)
Total investments sold short, at fair value	—			(2		)	197			228			1,372		(2,243		)	—		—		(448		)
Financial derivatives– liabilities, at fair value-
Credit default swaps on asset-backed securities	$	(239	)	$	—		$	(102	)	$	35		$	—	$	85		$	—	$	—	$	(221	)
Total return swaps	—			—			2,516			(4,662		)	14		(2,530		)	—		—		(4,662		)
Total financial derivatives– liabilities, at fair value	(239		)	—			2,414			(4,627		)	14		(2,445		)	—		—		(4,883		)
Securitized debt:
Securitized debt	(774		)	(15		)	—			26			763		—			—		—		—
Total securitized debt	(774		)	(15		)	—			26			763		—			—		—		—
Guarantees:
Guarantees	—			—			—			(828		)	—		—			—		—		(828		)
Total guarantees	—			—			—			(828		)	—		—			—		—		(828		)
Total investments sold short, financial derivatives–liabilities, securitized debt, and guarantees, at fair value	$	(1,013	)	$	(17	)	$	2,611		$	(5,201	)	$	2,149	$	(4,688	)	$	—	$	—	$	(6,159	)

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 December 31, 2015, as well as Level 3 financial instruments disposed of by the Company during the year ended December 31, 2015. For Level 3 financial instruments held by the Company at December 31, 2015, change in net unrealized gain (loss) of $(20.7) million, $7 thousand, $(4.6) million, and $(0.8) million, for the year ended December 31, 2015 relate to investments, financial derivatives–assets, financial derivatives–liabilities, and guarantees, respectively.

As of December 31, 2015, the Company transferred $48.5 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/or similar assets. This increase in observed trading activity led to greater price transparency for these assets, thereby making a Level 2 designation appropriate in the Company's view.

In addition, as of December 31, 2015, the Company transferred $6.7 million of non-Agency RMBS from Level 2 to Level 3. Following December 2014, these securities 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.

There were no transfers of financial instruments between Level 1 and Level 2 during the years ended December 31, 2017, 2016, and 2015.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details