Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Outstanding Interest Rate Swaptions and Derivative Instrument Information

The following table summarizes changes in the notional amount of our derivative instruments during 2018:

$ in thousands	Notional Amount as of December 31, 2017	Additions	Settlement, Termination, Expiration or Exercise		Notional Amount as of March 31, 2018
Interest Rate Swaps (1) (2)	8,620,000	1,000,000	(350,000	)	9,270,000
Futures Contracts	—	430,000	(215,000	)	215,000
Currency Forward Contracts	76,859	77,837	(76,860	)	77,836
Credit Derivatives	553,493	—	(5,797	)	547,696
Total	9,250,352	1,507,837	(647,657	)	10,110,532

(1) Notional amount as of March 31, 2018 excludes $1.3 billion of interest rate swaps with forward start dates.

(2) Notional amount as of December 31, 2017 excludes $500.0 million of interest rate swaps with forward start dates.

Interest Rate Derivatives Outstanding Designated as Cash Flow Hedges

As of March 31, 2018, we had the following interest rate swaps outstanding:

$ in thousands Counterparty	Notional	Maturity Date	Fixed Interest Rate in Contract
UBS AG	500,000	5/24/2018	1.10	%
ING Capital Markets LLC	400,000	6/5/2018	0.87	%
CME Central Clearing	300,000	2/5/2021	2.50	%
CME Central Clearing	300,000	2/5/2021	2.69	%
Wells Fargo Bank, N.A.	200,000	3/15/2021	3.14	%
CME Central Clearing	500,000	5/24/2021	2.25	%
Citibank, N.A.	200,000	5/25/2021	2.83	%
CME Central Clearing	500,000	6/24/2021	2.44	%
HSBC Bank USA, National Association	550,000	2/24/2022	2.45	%
CME Central Clearing	1,000,000	6/9/2022	2.21	%
CME Central Clearing	1,000,000	8/14/2022	1.87	%
The Royal Bank of Scotland Plc	500,000	8/15/2023	1.98	%
CME Central Clearing	600,000	8/24/2023	2.88	%
HSBC Bank USA, National Association	500,000	12/15/2023	2.20	%
CME Central Clearing	450,000	1/12/2024	2.10	%
CME Central Clearing	450,000	1/25/2024	2.15	%
LCH Central Clearing	1,000,000	2/6/2025	2.77	%
CME Central Clearing	100,000	4/2/2025	2.04	%
LCH Central Clearing	220,000	8/29/2027	2.12	%
Total	9,270,000		2.22	%

As of March 31, 2018, we had the following additional interest rate swaps outstanding with forward start dates:

$ in thousands Counterparty		Notional	Maturity Date	Fixed Interest Rate in Contract
LCH Central Clearing	(1)	600,000	2/5/2026	2.64	%
CME Central Clearing	(2)	250,000	5/24/2028	2.78	%
CME Central Clearing	(2)	250,000	5/24/2028	2.39	%
LCH Central Clearing	(3)	200,000	3/15/2031	2.74	%
Total		1,300,000		2.63	%

(1) Forward start date of 2/5/2021

(2) Forward start date of 5/24/2018

(3) Forward start date of 3/15/2021

Disclosure of Credit Derivatives

At March 31, 2018 and December 31, 2017, terms of the GSE CRT embedded derivatives are:

$ in thousands	March 31, 2018	December 31, 2017
Fair value amount	42,932	45,400
Notional amount	547,696	553,493
Maximum potential amount of future undiscounted payments	547,696	553,493

Fair Value of Derivative Financial Instruments and Classification on Balance Sheet

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017.

$ in thousands

Derivative Assets			Derivative Liabilities
	As of March 31, 2018	As of December 31, 2017		As of March 31, 2018	As of December 31, 2017
Balance Sheet	Fair Value	Fair Value	Balance Sheet	Fair Value	Fair Value
Interest Rate Swaps Asset	26,280	6,896	Interest Rate Swaps Liability	18,558	31,548
Currency Forward Contracts	105	—	Currency Forward Contracts	184	1,217
			Futures Contracts	1,612	—

Effect of Derivative Financial Instruments on Statement of Operations

The tables below present the effect of our credit derivatives on the condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017.

$ in thousands	Three months ended March 31, 2018
Derivative not designated as hedging instrument	Realized gain (loss), net	GSE CRT embedded derivative coupon interest	Unrealized gain (loss), net		Realized and unrealized credit derivative income (loss), net
GSE CRT Embedded Derivatives	—	5,633	(2,468	)	3,165

$ in thousands	Three months ended March 31, 2017
Derivative not designated as hedging instrument	Realized gain (loss), net	GSE CRT embedded derivative coupon interest	Unrealized gain (loss), net	Realized and unrealized credit derivative income (loss), net
GSE CRT Embedded Derivatives	—	5,807	14,148	19,955

The following table summarizes the effect of interest rate swaps, futures contracts and currency forward contracts reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017:

$ in thousands	Three months ended March 31, 2018
Derivative not designated as hedging instrument	Realized gain (loss) on derivative instruments, net		Contractual net interest expense		Unrealized gain (loss), net		Gain (loss) on derivative instruments, net
Interest Rate Swaps	122,273		(12,112	)	32,374		142,535
Futures Contracts	(5,277	)	—		(1,612	)	(6,889	)
Currency Forward Contracts	(3,418	)	—		1,139		(2,279	)
Total	113,578		(12,112	)	31,901		133,367

$ in thousands	Three months ended March 31, 2017
Derivative not designated as hedging instrument	Realized gain (loss) on derivative instruments, net		Contractual net interest expense		Unrealized gain (loss), net	Gain (loss) on derivative instruments, net
Interest Rate Swaps	15,994		(22,894	)	12,950	6,050
Currency Forward Contracts	(1,076	)	—		488	(588	)
Total	14,918		(22,894	)	13,438	5,462