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Financial Derivatives (Tables)

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table details the fair value of the Company's holdings of financial derivatives as of September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities sale contracts	$	6,826	$	7,985
Fixed payer interest rate swaps	176,648		116,768
Fixed receiver interest rate swaps	640		254
Credit default swaps on asset-backed securities	76		76
Credit default swaps on asset-backed indices	3,574		3,366
Credit default swaps on corporate bond indices	2,298		83
Total return swaps	16		—
Futures	6,165		2,772
Forwards	263		77
Warrants	1,517		1,137
Total financial derivatives–assets, at fair value	198,023		132,518
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	(681)		(2,007)
TBA securities sale contracts	(2)		—
Fixed payer interest rate swaps	(67)		(1,408)
Fixed receiver interest rate swaps	(28,396)		(48,882)
Credit default swaps on asset-backed indices	(33)		(33)
Credit default swaps on corporate bonds	(268)		(259)
Credit default swaps on corporate bond indices	(8,891)		(1,513)
Futures	(163)		(96)
Forwards	(19)		—
Total financial derivatives–liabilities, at fair value	(38,520)		(54,198)
Total	$	159,503	$	78,320

Schedule of Interest Rate Derivatives [Table Text Block]

The following tables provide information about the Company's fixed payer interest rate swaps as of September 30, 2023 and December 31, 2022:

September 30, 2023:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	629,547	$	13,213	3.18	%	5.34	%	0.86
2025	222,190		8,655		3.19		5.31		1.74
2026	84,637		2,170		3.91		5.31		2.62
2027	209,841		13,960		2.78		5.31		3.70
2028	795,474		31,199		3.58		5.30		4.72
2029	53,011		6,068		2.19		5.31		5.57
2030	123,317		7,742		3.31		5.32		6.78
2031	157,766		30,813		1.51		5.31		7.71
2032	181,867		21,002		2.80		5.31		8.81
2033	369,690		29,585		3.33		5.10		9.56
2035	500		170		0.78		5.33		12.06
2036	1,102		342		1.19		5.31		12.39
2037	45,000		7,113		2.81		5.31		13.91
2038	32,500		980		4.01		4.50		14.92
2040	500		208		0.90		5.33		17.07
2049	5,729		1,382		2.63		5.31		25.28
2050	500		254		0.98		5.33		27.07
2052	5,000		1,725		2.07		5.31		28.52
Total	$	2,918,171	$	176,581	3.17	%	5.28	%	5.01

December 31, 2022:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	664,398	$	13,576	0.64	%	4.51	%	0.38
2024	817,850		17,326		3.03		4.35		1.55
2025	382,793		11,747		2.89		4.32		2.51
2026	100		12		0.79		4.41		3.58
2027	264,500		8,218		3.01		4.30		4.53
2028	114,119		14,230		1.44		4.37		5.49
2029	54,428		4,485		2.45		4.65		6.31
2030	68,300		5,763		2.30		4.36		7.39
2031	161,009		23,799		1.71		4.48		8.46
2032	236,277		10,161		2.98		4.30		9.63
2035	500		142		0.78		4.33		12.81
2036	1,100		267		1.45		4.67		13.13
2037	45,000		3,578		2.81		4.30		14.66
2040	500		171		0.90		4.33		17.82
2049	5,796		630		2.89		3.74		26.02
2050	500		203		0.98		4.33		27.82
2052	5,000		1,052		2.07		4.30		29.27
Total	$	2,822,170	$	115,360	2.27	%	4.39	%	3.47

The following tables provide information about the Company's fixed receiver interest rate swaps as of September 30, 2023 and December 31, 2022:

September 30, 2023:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2024	$	427,234	$	(1,056)	5.33	%	5.17	%	0.50
2025	138,918		(943)		5.31		4.88		1.46
2026	410,298		(17,440)		5.32		3.37		2.46
2027	11,591		(425)		5.31		3.74		4.13
2028	257,796		(4,036)		5.31		4.14		4.57
2030	27,000		(901)		5.31		3.78		6.84
2033	51,428		(2,302)		5.32		3.76		9.68
2035	500		(174)		5.31		0.74		12.06
2040	500		(215)		5.31		0.84		17.07
2050	500		(264)		5.31		0.90		27.07
Total	$	1,325,765	$	(27,756)	5.32	%	4.28	%	2.54

December 31, 2022:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2023	$	41,407	$	(84)	4.74	%	2.00	%	0.22
2024	818,037		(25,569)		4.27		2.39		1.40
2025	328,775		(5,468)		4.30		3.48		2.84
2026	215,852		(11,312)		4.32		2.26		3.25
2027	311,007		(1,067)		4.30		3.67		4.89
2032	59,155		(4,596)		4.30		2.58		9.58
2035	500		(145)		4.30		0.74		12.81
2040	500		(175)		4.30		0.84		17.82
2050	500		(212)		4.30		0.90		27.82
Total	$	1,775,733	$	(48,628)	4.30	%	2.79	%	2.76

Schedule of Credit Default Swaps [Table Text Block]

The following table provides information about the Company's credit default swaps as of September 30, 2023 and December 31, 2022:


	As of
	September 30, 2023					December 31, 2022
Type(1)	Notional		Fair Value		Weighted Average Remaining Term (Years)	Notional		Fair Value		Weighted Average Remaining Term (Years)
($ in thousands)
Asset:
Long:
Credit default swaps on asset-backed indices	$	234	$	12	14.25	$	253	$	4	14.99
Credit default swaps on corporate bonds	31		—		0.22	—		—		—
Credit default swaps on corporate bond indices	148,953		2,298		4.67	2,037		40		0.97
Short:
Credit default swaps on asset-backed securities	(220)		76		11.86	(220)		76		12.61
Credit default swaps on asset-backed indices	(42,770)		3,562		35.32	(58,004)		3,362		35.70
Credit default swaps on corporate bond indices	—		—		—	(1,498)		43		0.97
Liability:
Long:
Credit default swaps on asset-backed indices	65		(33)		25.73	65		(33)		26.48
Short:
Credit default swaps on corporate bonds	(16,400)		(268)		3.31	(16,400)		(259)		4.06
Credit default swaps on corporate bond indices	(716,384)		(8,891)		5.11	(165,006)		(1,513)		4.94
	$	(626,491)	$	(3,244)	7.23	$	(238,773)	$	1,720	12.35

(1)Long notional represents contracts where the Company has written protection and short notional represents contracts where the Company has purchased protection.

Schedule of Futures Contracts [Table Text Block]

The following table provides information about the Company's long and short positions in futures as of September 30, 2023 and December 31, 2022:


	As of
	September 30, 2023					December 31, 2022
Description	Notional Amount		Fair Value		Remaining Months to Expiration	Notional Amount		Fair Value		Remaining Months to Expiration
	(In thousands)					(In thousands)
Assets:
Short Contracts:
U.S. Treasury futures	$	(276,600)	$	6,165	2.73	$	(267,300)	$	2,772	2.70
Liabilities:
Long Contracts:
U.S. Treasury futures	1,900		(163)		2.67	1,900		(65)		2.70
Short Contracts:
U.S. Treasury futures	—		—		—	(49,800)		(31)		3.00
Total, net	$	(274,700)	$	6,002	2.73	$	(315,200)	$	2,676	2.75

Schedule of Derivative Warrant Contracts [Table Text Block]

Warrants

The following table provides information about the Company's warrants contracts to purchase shares as of September 30, 2023 and December 31, 2022:


	September 30, 2023				December 31, 2022
Description	Number of Shares Underlying Warrant	Fair Value		Remaining Years to Expiration	Number of Shares Underlying Warrant	Fair Value		Remaining Years to Expiration
	(In thousands)				(In thousands)
Warrants	566	$	1,517	1.27	3,105	$	1,137	0.77

Schedule of TBA securities [Table Text Block]

As of September 30, 2023 and December 31, 2022, the Company had outstanding TBA purchase and sale contracts as follows:


	September 30, 2023								December 31, 2022
TBA Securities	Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)		Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)
(In thousands)
Purchase contracts:
Liabilities	$	46,102	$	44,391	$	43,710	$	(681)	$	163,127	$	157,096	$	155,089	$	(2,007)
Sale contracts:
Assets	(341,311)		(304,426)		(297,600)		6,826		(691,568)		(652,049)		(644,064)		7,985
Liabilities	(1,280)		(1,181)		(1,183)		(2)		—		—		—		—
	(342,591)		(305,607)		(298,783)		6,824		(691,568)		(652,049)		(644,064)		7,985
Total TBA securities, net	$	(296,489)	$	(261,216)	$	(255,073)	$	6,143	$	(528,441)	$	(494,953)	$	(488,975)	$	5,978

(1)Notional amount represents the principal balance of the underlying Agency RMBS.

(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.

(3)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.

(4)Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis, and is reported in Financial derivatives-assets, at fair value and Financial derivatives-liabilities, at fair value on the Condensed Consolidated Balance Sheet.

Schedule of Gains and Losses on Derivative Contracts

Gains and losses on the Company's derivative contracts for the three- and nine-month periods ended September 30, 2023 and 2022 are summarized in the tables below:


		Three-Month Period Ended September 30, 2023
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	7,462	$	3,405	$	10,867	$	6,656	$	38,828	$	45,484
Credit default swaps on asset-backed indices	Credit			(975)		(975)				224		224
Credit default swaps on corporate bond indices	Credit			(3,982)		(3,982)				3,531		3,531
Credit default swaps on corporate bonds	Credit			(42)		(42)				15		15
Total return swaps	Equity Market/Credit			30		30				16		16
TBAs	Interest Rate			13,015		13,015				3,786		3,786
Futures	Interest Rate/Currency			7,253		7,253				2,214		2,214
Forwards	Currency			429		429				203		203
Warrants	Credit			(312)		(312)				312		312
Total		$	7,462	$	18,821	$	26,283	$	6,656	$	49,129	$	55,785

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(9) thousand for the three-month period ended September 30, 2023, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Three-Month Period Ended September 30, 2022
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	2,841	$	5,442	$	8,283	$	361	$	22,845	$	23,206
Credit default swaps on asset-backed securities	Credit			(844)		(844)				717		717
Credit default swaps on asset-backed indices	Credit			375		375				(514)		(514)
Credit default swaps on corporate bond indices	Credit			811		811				(1,281)		(1,281)
Credit default swaps on corporate bonds	Credit			(57)		(57)				(18)		(18)
Total return swaps	Credit			—		—				(37)		(37)
TBAs	Interest Rate			9,085		9,085				27,926		27,926
Futures	Interest Rate			445		445				365		365
Forwards	Currency			897		897				17		17
Warrants	Equity Market/Credit			—		—				(140)		(140)
Total		$	2,841	$	16,154	$	18,995	$	361	$	49,880	$	50,241

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(18) thousand for the three-month period ended September 30, 2022, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Nine-Month Period Ended September 30, 2023
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	22,489	$	(5,729)	$	16,760	$	13,421	$	44,706	$	58,127
Credit default swaps on asset-backed indices	Credit			(1,215)		(1,215)				2,156		2,156
Credit default swaps on corporate bond indices	Credit			(6,071)		(6,071)				2,565		2,565
Credit default swaps on corporate bonds	Credit			(124)		(124)				(9)		(9)
Total return swaps	Equity Market/Credit			30		30				16		16
TBAs	Interest Rate			17,287		17,287				165		165
Futures	Interest Rate/Currency			4,189		4,189				3,326		3,326
Forwards	Currency			73		73				167		167
Warrants	Credit			(312)		(312)				381		381
Total		$	22,489	$	8,128	$	30,617	$	13,421	$	53,473	$	66,894

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(3) thousand for the nine-month period ended September 30, 2023, which is included on the Condensed Consolidated Statement of Operations in Other, net.


		Nine-Month Period Ended September 30, 2022
Derivative Type	Primary Risk Exposure	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(1)		Change in Net Unrealized Gains (Losses) on Financial Derivatives(1)
(In thousands)
Interest rate swaps	Interest Rate	$	640	$	15,514	$	16,154	$	1,759	$	62,879	$	64,638
Credit default swaps on asset-backed securities	Credit			(854)		(854)				615		615
Credit default swaps on asset-backed indices	Credit			40		40				1,190		1,190
Credit default swaps on corporate bond indices	Credit			1,048		1,048				2,376		2,376
Credit default swaps on corporate bonds	Credit			(76)		(76)				89		89
Total return swaps	Credit			—		—				(37)		(37)
Options	Credit			147		147				148		148
TBAs	Interest Rate			55,876		55,876				27,997		27,997
Futures	Interest Rate			15,493		15,493				183		183
Forwards	Currency			1,693		1,693				468		468
Warrants	Equity Market/Credit			(413)		(413)				372		372
Total		$	640	$	88,468	$	89,108	$	1,759	$	96,280	$	98,039

(1)Includes foreign currency remeasurement on financial derivatives in the amount of $(43) thousand for the nine-month period ended September 30, 2022, which is included on the Condensed Consolidated Statement of Operations in Other, net.

Derivative activity, volume

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the nine-month period ended September 30, 2023 and the year ended December 31, 2022:


Derivative Type	Nine-Month Period Ended September 30, 2023		Year Ended December 31, 2022
(In thousands)
Interest rate swaps	$	4,203,641	$	3,292,243
TBAs	624,337		796,003
Credit default swaps	433,155		130,819
Futures	229,170		186,446
Forwards	13,489		13,676
Warrants	2,371		3,378
Total return swaps	599		688
Options	—		13,846

Schedule of Credit Derivatives

Written credit derivatives held by the Company at September 30, 2023 and December 31, 2022 are summarized below:


Credit Derivatives	September 30, 2023		December 31, 2022
(In thousands)
Fair Value of Written Credit Derivatives, Net	$	2,277	$	11
Notional Value of Written Credit Derivatives (1)	149,283		2,355

(1)The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive, upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association, or "ISDA," counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional value of written credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional value of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.