DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

8. DERIVATIVE INSTRUMENTS

The Company uses derivative instruments primarily to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk. The following is a breakdown of the derivatives outstanding as of December 31, 2020 and 2019 ($ in thousands):

December 31, 2020


			Fair Value				Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)

Caps
1 Month LIBOR	$	69,571	$	—	$	—	0.35
Futures
5-year Swap	23,800		108		—		0.25
10-year Swap	41,800		191		—		0.25


Total futures	65,600		299		—







Total derivatives	$	135,171	$	299	$	—

(1)Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.

December 31, 2019


			Fair Value				Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)

Caps
1Month LIBOR	$	69,571	$	—	$	—	0.36
Futures
5-year Swap	46,000		158		—		0.25
10-year Swap	149,800		516		—		0.25
5-year U.S. Treasury Note	1,100		4		—		0.25

Total futures	196,900		678		—


Credit Derivatives

S&P 500 Put Options	143,300		15		—		0.05

Total credit derivatives	143,300		15		—
Total derivatives	$	409,771	$	693	$	—

(1)Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.

The following table indicates the net realized gains (losses) and unrealized appreciation (depreciation) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018 ($ in thousands):


	Year Ended December 31, 2020
Contract Type		Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions


Futures		$	(379)	$	(15,113)	$	(15,492)

Credit Derivatives		111		111		222
Total		$	(268)	$	(15,002)	$	(15,270)


	Year Ended December 31, 2019
Contract Type		Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions


Futures		$	1,653	$	(31,469)	$	(29,816)

Credit Derivatives		(111)		(84)		(195)
Total		$	1,542	$	(31,553)	$	(30,011)


	Year Ended December 31, 2018
Contract Type		Unrealized Gain/(Loss)		Realized Gain/(Loss)		Net Result from Derivative Transactions


Futures		$	(747)	$	16,176	$	15,429
Swaps		1,403		(848)		555
Credit Derivatives		49		(107)		(58)
Total		$	705	$	15,221	$	15,926

The Company’s counterparties held $0.8 million, $3.5 million and $5.0 million of cash margin as collateral for derivatives as of December 31, 2020, 2019, and 2018, respectively, which is included in restricted cash in the consolidated balance sheets.

Futures

Collateral posted with our futures counterparties is segregated in the Company’s books and records. Interest rate futures are centrally cleared by the Chicago Mercantile Exchange (“CME”) through a futures commission merchant. Interest rate futures that are governed by an ISDA agreement provide for bilateral collateral pledging based on the counterparties’ market value. The counterparties have the right to re-pledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate futures change.

The Company is required to post initial margin and daily variation margin for our interest rate futures that are centrally cleared by CME. CME determines the fair value of our centrally cleared futures, including daily variation margin. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate futures as settlement rather than collateral. As a result of this rule change, variation margin pledged on the Company’s centrally cleared interest rate futures is settled against the realized results of these futures.