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Fair Value Disclosures
 12 Months Ended
Nov. 30, 2022
Fair Value Disclosures [Abstract]  
Fair Value Disclosures 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 net asset value (“NAV”) of $1.29 billion and $1.05 billion at November 30, 2022 and 2021, respectively, by level within the fair value hierarchy (in thousands):
November 30, 2022
Level 1Level 2Level 3Counterparty and Cash Collateral Netting (1)Total
Assets:
Financial instruments owned:
Corporate equity securities$3,117,327 $140,157 $240,347 $— $3,497,831 
Corporate debt securities— 3,972,153 30,232 — 4,002,385 
Collateralized debt obligations and collateralized loan obligations— 71,640 55,824 — 127,464 
U.S. government and federal agency securities3,442,484 15,111 — — 3,457,595 
Municipal securities— 574,903 — — 574,903 
Sovereign obligations896,805 849,558 — — 1,746,363 
Residential mortgage-backed securities— 1,314,199 27,617 — 1,341,816 
Commercial mortgage-backed securities— 442,471 839 — 443,310 
Other asset-backed securities— 333,164 94,677 — 427,841 
Loans and other receivables— 1,069,041 168,875 — 1,237,916 
Derivatives3,437 3,427,921 11,052 (3,093,244)349,166 
Investments at fair value— 3,750 161,992 — 165,742 
Total financial instruments owned, excluding Investments at fair value based on NAV$7,460,053 $12,214,068 $791,455 $(3,093,244)$17,372,332 
Securities received as collateral
$100,362 $— $— $— $100,362 
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities$2,097,436 $48,931 $750 $— $2,147,117 
Corporate debt securities— 2,337,691 500 — 2,338,191 
U.S. government and federal agency securities3,223,637 — — — 3,223,637 
Sovereign obligations879,909 771,125 — — 1,651,034 
Commercial mortgage-backed securities— — 490 — 490 
Loans— 180,147 3,164 — 183,311 
Derivatives204 4,174,082 70,576 (2,732,165)1,512,697 
Total financial instruments sold, not yet purchased$6,201,186 $7,511,976 $75,480 $(2,732,165)$11,056,477 
Other secured financings$— $— $1,712 $— $1,712 
Obligation to return securities received as collateral
$100,362 $— $— $— $100,362 
Long-term debt
$— $922,705 $661,123 $— $1,583,828 
(1)Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.
November 30, 2021
Level 1Level 2Level 3Counterparty and Cash Collateral Netting (1)Total
Assets:
Financial instruments owned:
Corporate equity securities$2,737,255 $257,318 $118,489 $— $3,113,062 
Corporate debt securities— 3,836,341 11,803 — 3,848,144 
Collateralized debt obligations and collateralized loan obligations— 579,518 31,946 — 611,464 
U.S. government and federal agency securities3,045,295 68,784 — — 3,114,079 
Municipal securities— 509,559 — — 509,559 
Sovereign obligations899,086 654,199 — — 1,553,285 
Residential mortgage-backed securities— 1,168,246 1,477 — 1,169,723 
Commercial mortgage-backed securities— 196,419 2,333 — 198,752 
Other asset-backed securities— 337,022 93,524 — 430,546 
Loans and other receivables— 1,515,314 178,417 — 1,693,731 
Derivatives4,429 3,861,551 10,248 (3,305,756)570,472 
Investments at fair value— 11,369 154,373 — 165,742 
Total financial instruments owned, excluding Investments at fair value based on NAV$6,686,065 $12,995,640 $602,610 $(3,305,756)$16,978,559 
Securities received as collateral
$7,289 $— $— $— $7,289 
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities$1,671,696 $19,654 $4,635 $— $1,695,985 
Corporate debt securities— 2,111,777 482 — 2,112,259 
U.S. government and federal agency securities2,457,420 — — — 2,457,420 
Sovereign obligations935,801 593,040 — — 1,528,841 
Residential mortgage-backed securities— 719 — — 719 
Commercial mortgage-backed securities — — 210 — 210 
Loans— 49,555 9,925 — 59,480 
Derivatives1,815 5,034,544 78,017 (3,702,200)1,412,176 
Total financial instruments sold, not yet purchased$5,066,732 $7,809,289 $93,269 $(3,702,200)$9,267,090 
Other secured financings$— $76,883 $25,905 $— $102,788 
Obligation to return securities received as collateral
$7,289 $— $— $— $7,289 
Long-term debt
$— $961,866 $881,732 $— $1,843,598 
(1)Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.
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 of the fair value hierarchy. To the extent these securities are actively traded, valuation adjustments are not applied.
•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 from 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/Earnings before interest, taxes, depreciation and amortization (“EBITDA”), price/book value), discounted cash flow analyses and transaction prices observed from 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 measured primarily from observed prices on recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and can be measured using third-party valuation services or 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
•Investment Grade Corporate Bonds: Investment grade corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads. Investment grade 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 may be used. Investment grade corporate bonds measured using alternative valuation techniques are categorized within Level 2 or Level 3 of the fair value hierarchy
•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 from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.
Collateralized Debt Obligations and Collateralized Loan Obligations
Collateralized debt obligations (“CDOs”) and collateralized loan obligations (“CLOs”) are measured based on prices observed from 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 transactions 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 loss severity.
U.S. Government and Federal Agency Securities
•U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices obtained from external pricing services and categorized within Level 1 of the fair value hierarchy.
•U.S. Agency Debt Securities: Callable and non-callable U.S. agency 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, where available, or recently executed independent transactions of comparable size and are generally categorized within Level 2 of the fair value hierarchy.
Sovereign Obligations
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. Sovereign government obligations, with consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy.
Residential Mortgage-Backed Securities
•Agency Residential Mortgage-Backed Securities (“RMBS”): Agency RMBS include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency RMBS are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.
•Non-Agency RMBS: The fair value of non-agency RMBS is determined primarily using pricing data from external pricing services, where available, and 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. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.
Commercial Mortgage-Backed Securities
•Agency Commercial Mortgage-Backed Securities (“CMBS”): Government National Mortgage Association (“Ginnie Mae”) project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures. Federal National Mortgage Association (“Fannie Mae”) Delegated Underwriting and Servicing (“DUS”) mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. Ginnie Mae project loan bonds and Fannie Mae DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.
•Non-Agency CMBS: Non-agency CMBS are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-Agency CMBS are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.
Other Asset-Backed Securities
Other asset-backed securities (“ABS”) 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 or Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services, broker quotes and prices observed from recently executed market transactions. In addition, recent transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.
Loans and Other Receivables
•Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent. Price quotations are derived using market prices for debt securities of the same creditor and estimates of future cash flows. Future cash flows use assumptions regarding creditor default and recovery rates, credit rating, effective yield 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 and data provider pricing. 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 Ginnie Mae Project and Construction Loans: Valuations of participation certificates in Ginnie Mae project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. 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 and incorporating 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 Claim Receivables: Escrow and claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable. Escrow and 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.
Derivatives
•Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.
•Over-the-Counter (“OTC”) Derivative Contracts: 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 transaction. Where available, valuation inputs are calibrated from observable 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 Black-Scholes, with key inputs including the underlying security price, foreign exchange spot rate, 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. Where available, external data is used in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are generally 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.
Investments at Fair Value
Investments at fair value includes investments in hedge funds and private equity funds, which are measured at the NAV 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.
The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):
November 30, 2022
Fair Value (1)Unfunded Commitments
Equity Long/Short Hedge Funds (2)
$441,229 $— 
Equity Funds (3)
73,176 36,861 
Commodity Fund (4)
24,283 — 
Multi-asset Funds (5)
401,655 — 
Other Funds (6)
353,621 53,994 
Total$1,293,964 $90,855 
November 30, 2021
Fair Value (1)Unfunded Commitments
Equity Long/Short Hedge Funds (2)
$466,231 $— 
Equity Funds (3)
66,152 18,888 
Commodity Fund (4)
24,401 — 
Multi-asset Funds (5)
390,224 — 
Other Funds (6)
99,054 36,090 
Total$1,046,062 $54,978 
(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, primarily in both public and private equity securities in domestic and international markets. At November 30, 2022 and 2021, approximately 58% and 74%, respectively, became redeemable quarterly with 90 days written notice on December 31, 2021. At November 30, 2022 and 2021, approximately 34% and 21%, respectively, of the fair value of investments cannot be redeemed because these investments include restrictions that do not allow for redemption before November 30, 2023. At November 30, 2022 and 2021, approximately 6% and 5%, respectively, of the investments are redeemable quarterly with 60 days prior written notice. At November 30, 2022, the remaining balance cannot be redeemed because these investments include restrictions that do not allow for redemption before August 31, 2025.
(3)The 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 primarily expected to be liquidated in approximately one to twelve years.
(4)This category includes investments in a hedge fund that invests, long and short, primarily in commodities. Investments in this category are redeemable quarterly with 60 days prior written notice.
(5)This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At both November 30, 2022 and 2021, investments representing approximately 78% of the fair value of investments in this category are redeemable monthly with 60 days prior written notice. At November 30, 2022 and 2021, approximately 15% and 22%, respectively, of the fair value of investments in this category are redeemable quarterly with 90 days prior written notice.
(6)This category includes investments in a fund that invests in short-term trade receivables and payables that are expected to generally be outstanding between 90 to 120 days and short-term credit instruments. This category also includes investments in a fund that invests in distressed and special situations long and short credit strategies across sectors and asset types. Investments in this category are redeemable quarterly with 90 days prior written notice.
Other Secured Financings
Other secured financings that are accounted for at fair value are classified within Level 2 or Level 3 of the fair value hierarchy. Fair value is based on estimates of future cash flows incorporating assumptions regarding recovery rates.
Securities Received as Collateral / Obligations to Return Securities Received as Collateral
In connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral. Valuation is based on the price of the underlying security and is categorized within the corresponding leveling guidance above. These financial instruments are typically categorized within Level 1 of the fair value hierarchy.
Long-term Debt
Long-term debt includes variable rate, fixed-to-floating rate, equity-linked notes, constant maturity swap, digital and Bermudan structured notes. These are valued using various valuation models that incorporate our own credit spread, market price quotations from external pricing sources referencing the appropriate interest rate curves, volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt notes are generally categorized within Level 2 of the fair value hierarchy where market trades have been observed during the period or model pricing is available, otherwise the notes are categorized within Level 3.
Level 3 Rollforwards
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 year ended November 30, 2022 (in thousands):
For instruments still held at November 30, 2022, changes in unrealized gains/(losses) included in:
Balance at November 30, 2021Total gains/ losses (realized and unrealized) (1)PurchasesSalesSettlementsIssuancesNet transfers into/
(out of)
Level 3		Balance at November 30, 2022Earnings (1)Other comprehensive income (1)
Assets:
Financial instruments owned:
Corporate equity securities$118,489 $(645)$171,700 $(62,474)$(298)$— $13,575 $240,347 $7,286 $— 
Corporate debt securities11,803 946 18,686 (23,964)(9)— 22,770 30,232 (2,087)— 
CDOs and CLOs31,946 7,099 44,995 (22,600)(16,634)— 11,018 55,824 (10,938)— 
RMBS1,477 (13,210)35,774 (372)(240)— 4,188 27,617 (7,728)— 
CMBS2,333 (733)— (749)— — (12)839 (703)— 
Other ABS93,524 (6,467)74,353 (20,362)(39,647)— (6,724)94,677 (26,982)— 
Loans and other receivables178,417 (1,912)45,536 (33,692)(48,218)— 28,744 168,875 (11,610)— 
Investments at fair value154,373 46,735 74,984 (74,742)(15,951)— (23,407)161,992 33,294 — 
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities$4,635 $(3,611)$(815)$4,858 $— $— $(4,317)$750 $2,382 $— 
Corporate debt securities482 88 (70)— — — — 500 (88)— 
CMBS210 — — 280 — — — 490 — — 
Loans9,925 1,197 (5,173)— 96 — (2,881)3,164 (2,484)— 
Net derivatives (2)67,769 (181,750)(1,559)1,285 — 28,436 145,343 59,524 168,304 — 
Other secured financings25,905 (650)— — (23,543)— — 1,712 650 
Long-term debt881,732 (280,967)— — (3,919)83,874 (19,597)661,123 239,400 41,567 
(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
(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 Year Ended November 30, 2022
During the year ended November 30, 2022, transfers of assets of $111.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:
•Loans and other receivables of $33.2 million, corporate debt securities of $22.8 million, other ABS of $22.6 million, corporate equity securities of $17.9 million and CDOs and CLOs of $11.0 million due to reduced pricing transparency.
During the year ended November 30, 2022, transfers of assets of $61.5 million from Level 3 to Level 2 are primarily attributed to:
•Other ABS of $29.3 million, investment at fair value of $23.4 million, loans and other receivables of $4.5 million and corporate equity securities of $4.3 million due to greater pricing transparency.
During the year ended November 30, 2022, transfers of liabilities of $172.1 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:
•Net derivatives of $152.8 million and structured notes within long-term debt of $19.3 million due to reduced pricing and market transparency.
During the year ended November 30, 2022, transfers of liabilities of $53.6 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:
•Structured notes within long-term debt of $38.9 million, net derivatives of $7.5 million and corporate equity securities of $4.3 million due to greater pricing and market transparency.
Net gains on Level 3 assets were $31.8 million and net gains on Level 3 liabilities were $465.7 million for the year ended November 30, 2022. Net gains on Level 3 assets were primarily due to increased market values in investments at fair value and CDOs and CLOs, partially offset by decreases in RMBS and Other ABS. Net gains on Level 3 liabilities were primarily due to decreased market valuations of certain structured notes within long-term debt and certain derivatives.
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 year ended November 30, 2021 (in thousands):
For instruments still held at November 30, 2021, changes in unrealized gains/(losses) included in:
Balance at November 30, 2020Total gains/
losses
(realized
and
unrealized)
(1)		PurchasesSalesSettlementsIssuancesNet
transfers
into/
(out of)
Level 3		Balance at November 30, 2021Earnings (1)Other
comprehensive
income (1)
Assets:
Financial instruments owned:
Corporate equity securities$116,089 $19,213 $8,778 $(34,307)$(49)$— $8,765 $118,489 $11,589 $— 
Corporate debt securities23,146 1,565 11,161 (7,978)(1,417)— (14,674)11,803 1,724 — 
CDOs and CLOs17,972 8,092 32,618 (27,332)(5,042)— 5,638 31,946 (4,390)— 
RMBS21,826 (243)708 (1,183)(354)— (19,277)1,477 (131)— 
CMBS2,003 (1,694)2,445 (393)(13)— (15)2,333 (733)— 
Other ABS79,995 5,335 65,277 (21,727)(45,397)— 10,041 93,524 (14,471)— 
Loans and other receivables186,568 1,250 50,167 (55,848)(20,442)— 16,722 178,417 (4,905)— 
Investments at fair value213,946 112,012 22,957 (47,243)(9,809)— (137,490)154,373 25,723 — 
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities$4,434 $(83)$(21)$318 $— $— $(13)$4,635 $83 $— 
Corporate debt securities141 1,205 (815)— (49)— — 482 (139)— 
CMBS35 — (35)210 — — — 210 — — 
Loans6,913 3,384 (469)220 — — (123)9,925 (1,523)— 
Net derivatives (2)26,017 7,246 — — (1,491)44,453 (8,456)67,769 (7,371)— 
Other secured financings1,543 (649)— — — 25,011 — 25,905 649 — 
Long-term debt676,028 (22,132)— — — 169,975 57,861 881,732 85,260 (63,126)
(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
(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 Year Ended November 30, 2021
During the year ended November 30, 2021, transfers of assets of $21.1 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:
•Other ABS of $10.2 million, CDOs and CLOs of $7.6 million and corporate debt securities of $3.3 million due to reduced pricing transparency.
During the year ended November 30, 2021, transfers of assets of $168.7 million from Level 3 to Level 2 are primarily attributed to:
•Investments at fair value of $137.5 million, RMBS of $19.3 million, corporate debt securities of $17.9 million and corporate equity securities of $5.4 million due to greater pricing transparency supporting classification into Level 2.
During the year ended November 30, 2021, transfers of liabilities of $74.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:
•Structured notes within long-term debt of $57.9 million and net derivatives of $16.2 million due to reduced market and pricing transparency.
During the year ended November 30, 2021, transfers of liabilities of $24.7 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:
•Net derivatives of $24.7 million due to greater pricing transparency.
Net gains on Level 3 assets were $140.0 million and net gains on Level 3 liabilities were $12.9 million for the year ended November 30, 2021. Net gains on Level 3 assets were primarily due to increased market values in investments at fair value, corporate equity securities and CDOs and CLOs. Net gains on Level 3 liabilities were primarily due to decreased market valuations of certain structured notes within long-term debt, partially offset by decreased values of certain derivatives and loans.
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 year ended November 30, 2020 (in thousands):
For instruments still held at November 30, 2020, changes in unrealized gains/(losses) included in:
Balance at November 30, 2019Total gains/
losses
(realized
and
unrealized)
(1)		PurchasesSalesSettlementsIssuancesNet
transfers
into/
(out of)
Level 3		Balance at November 30, 2020Earnings (1)Other
comprehensive
income (1)
Assets:
Financial instruments owned:
Corporate equity securities$58,426 $1,411 $31,885 $(37,706)$— $34,688 $27,385 $116,089 $4,845 $— 
Corporate debt securities7,490 83 1,607 (391)(602)— 14,959 23,146 (270)— 
CDOs and CLOs28,788 (3,821)10,913 (14,389)(5,201)— 1,682 17,972 (17,212)— 
RMBS17,740 (934)7,887 (969)(1,053)— (845)21,826 (599)— 
CMBS6,110 (827)393 (1,856)(1,787)— (30)2,003 (295)— 
Other ABS42,563 (3,848)69,701 (1,638)(43,072)— 16,289 79,995 (5,945)
Loans and other receivables154,322 (6,203)110,116 (25,568)(57,455)— 11,356 186,568 (5,522)— 
Investments, at fair value205,412 (31,666)55,836 (167)(17,298)— 1,829 213,946 (33,514)— 
Securities purchased under agreements to resell25,000 — — — (25,000)— — — — — 
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities$4,487 $456 $(513)$— $— $— $4 $4,434 $(81)$— 
Corporate debt securities340 (268)(325)394 — — — 141 27 — 
CMBS35 — — 35 — — (35)35 — — 
Loans1,690 5,297 (440)— — — 366 6,913 (5,409)— 
Net derivatives (2)77,168 (40)(7,446)19,376 (2,216)— (60,825)26,017 (1,805)— 
Other secured financings— (2,475)— — — 4,018 — 1,543 2,475 — 
Long-term debt480,069 84,930 — — (57,088)248,718 (80,601)676,028 (51,567)(33,363)
(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in our Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
(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 Year Ended November 30, 2020
During the year ended November 30, 2020, transfers of assets of $122.2 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:
•Loans and other receivables of $45.1 million, corporate equity securities of $32.5 million, other ABS of $23.0 million and corporate debt securities of $18.0 million due to reduced price transparency.
During the year ended November 30, 2020, transfers of assets of $24.2 million from Level 3 to Level 2 are primarily attributed to:
•Other ABS of $6.8 million, Loans and other receivables of $6.6 million, corporate equity securities of $5.1 million and corporate debt securities $3.0 million due to greater pricing transparency supporting classification into Level 2.
During the year ended November 30, 2020, transfers of liabilities of $0.5 million from Level 2 to Level 3 are primarily attributed to:
•Loans of $0.4 million due to reduced pricing transparency.
During the year ended November 30, 2020, transfers of liabilities of $141.5 million from Level 3 to Level 2 are primarily attributed to:
•Structured notes within long-term debt of $80.6 million and net derivatives of $60.8 million due to greater market and pricing transparency.
Net losses on Level 3 assets were $46.3 million and net losses on Level 3 liabilities were $88.0 million for the year ended November 30, 2020. Net losses on Level 3 assets were primarily due to decreased market values in investments at fair value, loans and other receivables and other ABS. Net losses on Level 3 liabilities were primarily due to increased market valuations of certain structured notes within long-term debt and loans, partially offset by decreased values of other secured financings.
Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements at November 30, 2022 and 2021
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.
November 30, 2022
Financial Instruments OwnedFair Value
(in thousands)		Valuation TechniqueSignificant Unobservable Input(s)Input / RangeWeighted
Average
Corporate equity securities$240,347 
Non-exchange-traded securitiesMarket approachPrice$0-$325$43
Corporate debt securities$30,232 Market approachPrice$48-$82$65
EBITDA multiple4.2—
Scenario analysisEstimated recovery percentage7%—
CDOs and CLOs$55,824 Discounted cash flowsConstant prepayment rate20%—
Constant default rate2 %-3%2%
Loss severity30 %-40%32%
Discount rate/yield18 %-23%22%
Market approachPrice$67-$102$89
Scenario analysisEstimated recovery percentage69%—
CMBS$839 Scenario analysisEstimated recovery percentage45%—
Other ABS$55,858 Discounted cash flowsDiscount rate/yield6 %-20%17%
Cumulative loss rate8 %-22%19%
Duration (years)0.8-1.61.2
Loans and other receivables$168,875 Market approachPrice$1-$150$82
Scenario analysisEstimated recovery percentage6 %-78%30%
Investments at fair value$159,304 
Private equity securitiesMarket approachPrice$0-$14,919$604
Discount rate/yield23%—
Revenue$30,194,338—
Financial Instruments Sold, Not Yet Purchased:
Derivatives$65,841 
Equity optionsVolatility benchmarkingVolatility26 %-75%51%
Other secured financings$1,712 Scenario analysisEstimated recovery percentage9 %-30%23%
Long-term debt$661,123 
Structured notes Market approach Price$51-$97$64
Price€59-€99€77
November 30, 2021
Financial Instruments Owned:Fair Value
(in thousands)		Valuation TechniqueSignificant Unobservable Input(s)Input / RangeWeighted
Average
Corporate equity securities$117,803
Non-exchange-traded securitiesMarket approachPrice$1-$662$227
Price€15-€18€16
Volatility25 %-59%31%
Volatility benchmarkingVolatility40 %-53%45%
Corporate debt securities$11,803 Market approachPrice$13-$100$86
CDOs and CLOs$31,944 Discounted cash flowsConstant prepayment rate20%—
Constant default rate2%—
Loss severity25 % -30%26%
Discount rate/yield8 %-19%16%
Market approachPrice$86 -$103$93
CMBS$2,333 Scenario analysisEstimated recovery percentage81%—
Other ABS$86,099 Discounted cash flowsConstant prepayment rate0 % -35%31%
Constant default rate2 %4%4%
Loss severity60 %-85%55%
Discount rate/yield3 %-16%10%
Cumulative loss rate7 % -20%14%
Duration (years)0.7-1.41.1
Market approachPrice$37-$100$94
Loans and other receivables$177,193 Market approachPrice$31-$101$54
Discounted cash flowsDuration (years)0 -2.22.2
Scenario analysisEstimated recovery percentage9 %-100%76%
Derivatives$6,501 
Equity optionsVolatility benchmarkingVolatility46%—
Interest rate swapsMarket approachBasis points upfront0.1-8.13.3
Total return swapsPrice$100—
Investments at fair value$128,152 
Private equity securitiesMarket approachPrice$1-$152$32
EBITDA multiple16.9—
Revenue multiple4.9-5.15.0
Scenario analysisEstimated recovery percentage7%—
Discount rate/yield13%-21%17
Revenue growth0%—
Financial Instruments Sold, Not Yet Purchased:
Corporate equity securities
Non-exchange-traded securities$4,635 Market approachPrice$1—
Loans$9,925 Market approachPrice$31-$100$43
Scenario analysisEstimated recovery percentage50%—
Derivatives$76,533 
Equity optionsVolatility benchmarkingVolatility26 %-77%40%
Interest rate swapsMarket approachBasis points upfront0.1 -8.73.1
Total return swapsPrice$100—
Other secured financings$25,905 Scenario analysisEstimated recovery percentage13 %-98%92%
Long-term debt$881,732 
Structured notesMarket approachPrice$76-$115$94
Price€81-€113€103
The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices or a percentage of the reported enterprise fair value are excluded from the above tables. At November 30, 2022 and 2021, asset exclusions consisted of $80.2 million and $40.8 million, respectively, primarily composed of corporate equity securities, RMBS, other ABS, loans and other receivables, certain derivatives and investments at fair value. At November 30, 2022 and 2021, liability exclusions consisted of $9.6 million and $2.2 million, respectively, primarily composed of corporate equity securities, corporate debt securities, CMBS, loans and certain derivatives, .
Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs
For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of the fair value measurement due to the use of significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:
•Non-exchange-traded securities, corporate debt securities, CDOs and CLOs, loans and other receivables, other ABS, private equity securities, certain derivatives and structured notes using a market approach valuation technique. A significant increase (decrease) in the price of the private equity securities, non-exchange-traded securities, corporate debt securities, CDOs and CLOs, other ABS, loans and other receivables, total return swaps or structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the EBITDA multiple related to corporate debt and private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the revenue multiple related to private equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the discount rate/security yield related to private equity securities would result in a significantly lower (higher) fair value measurement. Depending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis points would result in a significant increase (decrease) in the fair value measurement of interest rate swaps.
•Loans and other receivables, corporate debt securities, CDOs and CLOs, CMBS, private equity securities and other secured financings using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the financial instrument would result in a significantly higher (lower) fair value measurement for the financial instrument. A significant increase (decrease) in the discount rate/yield underlying the investment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the investment would result in a significantly higher (lower) fair value measurement.
•CDOs and CLOs and other ABS using a discounted cash flow valuation technique. A significant increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate and duration would have differing impacts depending on the capital structure and type of security. A significant increase (decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in term based on the time to pay off the loan would result in a lower (higher) fair value measurement.
•Derivative equity options and non-exchange-traded securities using volatility benchmarking. A significant increase (decrease) in 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 investment banking and 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 and consumer loan commitments, purchases and fundings in connection with mortgage-backed 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 in our 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 in Investments in and loans to related parties in our Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for certain of our structured notes which are managed by our investment banking and capital markets businesses and are included in Long-term debt and Short-term borrowings in our Consolidated Statements of Financial Condition. 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 been elected for certain other 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 fair value related to instrument specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on Short-term borrowings, Other secured financings and Long-term debt measured at fair value under the fair value option (in thousands):
Year Ended November 30,
202220212020
Financial instruments owned:
Loans and other receivables$(20,529)$11,682 $(25,623)
Financial instruments sold, not yet purchased:
Loans— 1,077 — 
Loan commitments— — 464 
Short-term borrowings:
Other changes in fair value (2)— — (48)
Other secured financings:
Other changes in fair value (2)695 650 2,475 
Long-term debt:
Changes in fair value of instrument specific credit risk (1)63,344 (113,027)70,201 
Other changes in fair value (2)345,050 108,739 (84,116)
(1)Changes in fair value of instrument specific credit risk related to structured notes are included in our Consolidated Statements of Comprehensive Income, net of tax.
(2)Other changes in fair value are included in Principal transactions revenues in our Consolidated Statements of Earnings.
The following is a summary of the amounts by which contractual principal is greater than (less than) fair value for loans and other receivables, short-term borrowings, Other secured financings and Long-term debt measured at fair value under the fair value option (in thousands):
November 30,
20222021
Financial instruments owned:
Loans and other receivables (1)$2,144,632 $5,600,648 
Loans and other receivables on nonaccrual status and/or 90 days or
    greater past due (1) (2)		181,766 64,203 
Long-term debt and short-term borrowings
369,990 (38,391)
Other secured financings3,563 3,432 
(1)Interest income is recognized separately from other changes in fair value and is included in Interest revenues in our Consolidated Statements of Earnings.
(2)Amounts include loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of $83.4 million and $19.7 million at November 30, 2022 and 2021, respectively.
The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was $69.2 million and $56.9 million at November 30, 2022 and 2021, respectively, which includes loans and other receivables 90 days or greater past due of $65.1 million and $23.5 million at November 30, 2022 and 2021, respectively.
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets were measured at fair value on a non-recurring basis and are not included in the tables above. The following table presents those assets measured at fair value on a non-recurring basis for which we recognized a non-recurring fair value adjustment during the years ended November 30, 2022, 2021 and 2020 (in thousands):
November 30, 2022Level 2Level 3Impairment Losses
Exchange ownership interests and registrations (1)$— $— $39 
Investments in and loans to related parties (2) — 106,172 27,119 
Other assets (3)— 1,709 6,701 
November 30, 2021Level 2Level 3Impairment Losses
Exchange ownership interests and registrations (1)$1,935 $— $66 
November 30, 2020Level 2Level 3Impairment Losses
Exchange ownership interests and registrations (1)$1,974 $— $468 
Intangible assets (4)— — 300 
Investments in and loans to related parties (5) — — 55,612 
Other assets (6)36,400 46,200 
(1)These impairment losses, which represent ownership interests in market exchanges on which trading business is conducted, and registrations, were recognized in Other expenses in our Consolidated Statements of Earnings and the assets were in the Investment Banking and Capital Markets reportable business segment. The fair value is based on observed quoted sales prices for each individual membership. (See Note 11, Goodwill and Intangible Assets.)
(2)These impairment losses, which are related to certain equity method investments, were recognized in Other revenues in our Consolidated Statements of Earnings and the assets were in the Asset Management reportable business segment. The fair values were based on estimated future cash flows using discount rates ranging from 10.0% to 23.0%. (See Note 9, Investments.)
(3)These impairment losses, which relate to a real estate property, were recognized in Other expenses in our Consolidated Statements of Earnings and the assets were in the Asset Management reportable business segment. The fair values were based on estimated future cash flows discounted at 12.0%.
(4)These impairment losses were recognized in Other expenses in our Consolidated Statements of Earnings and the assets were in the Asset Management reportable business segment. (See Note 11, Goodwill and Intangible Assets.)
(5)These impairment losses, which are related to a real estate equity method investment, were recognized in Other revenues in our Consolidated Statements of Earnings and the assets were in the Asset Management reportable business segment. The fair value was based on a third party appraisal which incorporates Level 3 inputs of comparable property prices. (See Note 9, Investments.)
(6)These impairment losses, which are related to certain oil and gas properties, were recognized in Other expenses in our Consolidated Statements of Earnings and the assets were in the Asset Management reportable business segment. The fair values were based on estimated future cash flows of reserves discounted at 10.0%.
Financial Instruments Not Measured at Fair Value
Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations and would generally be presented within Level 1 of the fair value hierarchy.
Additionally, at November 30, 2022 and 2021, we had equity securities without readily determinable fair values, which we account for at cost, minus impairment, of $37.0 million and $119.4 million, respectively, which are presented within Other assets in the Consolidated Statements of Financial Condition. There were no impairments on these investments during the years ended November 30, 2022 and 2021. An impairment was recognized on these investments of $20.4 million during the year ended November 30, 2020. Realized gains of $3.6 million, $0.8 million and $2.1 million were recognized on these investments during the years ended November 30, 2022, 2021 and 2020, respectively. There were no unrealized gains or losses recognized on these investments during the years ended November 30, 2022, 2021 and 2020. These investments would generally be presented within Level 3 of the fair value hierarchy.