We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, credit and foreign exchange rate risk primarily by managing the amount, sources, and duration of our investments, borrowings, and the use of derivative financial instruments. Specifically, we use derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates or foreign exchange rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.



$ in thousands	Notional Amount as of December 31, 2018	Additions	Settlement, Termination, Expiration or Exercise		Notional Amount as of December 31, 2019
Interest Rate Swaps	12,370,000	26,950,000	(25,320,000	)	14,000,000
Futures Contracts	1,689,900	3,625,800	(5,315,700	)	—
Currency Forward Contracts	23,149	101,597	(101,635	)	23,111
Credit Derivatives	526,912	—	(61,946	)	464,966
Total	14,609,961	30,677,397	(30,799,281	)	14,488,077

Our repurchase agreements are usually settled on a short-term basis ranging from one month to six months. At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time. In addition, our secured loans have floating interest rates. As such, we are exposed to changing interest rates. Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposures to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps involve making fixed-rate payments to counterparty in exchange for the receipt of variable-rate amounts over the life of the agreements without exchange of the underlying notional amount.

Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements. We reclassified $23.7 million as a decrease (2018: $25.8 million as a decrease; 2017: $25.5 million as a decrease) to interest expense for the year ended December 31, 2019. During the next 12 months, we estimate that $23.8 million will be reclassified as a decrease to interest expense, repurchase agreements. As of December 31, 2019, $75.9 million (2018: $99.6 million) of net unrealized gains on discontinued cash flow hedges are still included in accumulated other comprehensive income.



$ in thousands	As of December 31, 2019
Maturities	Notional Amount ⁽¹⁾	Weighted Average Fixed Pay Rate		Weighted Average Receive Rate		Weighted Average Years to Maturity
2020	1,900,000	1.67	%	1.84	%	0.6
2021	2,500,000	1.40	%	1.77	%	1.3
2022	800,000	1.53	%	1.91	%	2.9
2023	2,400,000	1.44	%	1.72	%	3.9
2024	900,000	1.49	%	1.76	%	4.8
Thereafter	5,500,000	1.44	%	1.78	%	9.5
Total	14,000,000	1.47	%	1.79	%	5.2



$ in thousands	As of December 31, 2018
Maturities	Notional Amount ⁽²⁾	Weighted Average Fixed Pay Rate		Weighted Average Receive Rate		Weighted Average Years to Maturity
2019	1,500,000	2.70	%	2.47	%	0.9
2020	1,500,000	2.78	%	2.51	%	1.7
2021	2,300,000	2.51	%	2.58	%	2.5
2022	2,550,000	2.13	%	2.65	%	3.4
2023	1,600,000	2.39	%	2.47	%	4.7
Thereafter	2,920,000	2.47	%	2.55	%	6.8
Total	12,370,000	2.46	%	2.55	%	3.7

We purchase or sell certain TBAs and futures contracts to help mitigate the potential impact of changes in interest rates on the performance of our investment portfolio. We recognize realized and unrealized gains and losses associated with the purchases or sales of TBAs and futures contracts in gain (loss) on derivative instruments, net in our consolidated statements of operations.

We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies. We recognize realized and unrealized gains and losses associated with the purchases or sales of currency forward contracts in gain (loss) on derivative instruments, net in our consolidated statements of operations. As of December 31, 2019, we had $23.1 million (December 31, 2018: $23.1 million) of notional amount of currency forward contracts related to an investment in an unconsolidated venture denominated in Euro.

Our GSE CRTs purchased prior to August 24, 2015 are accounted for as hybrid financial instruments consisting of a debt host contract and an embedded credit derivative. Embedded derivatives associated with GSE CRTs are recorded within mortgage-backed and credit risk transfer securities, at fair value, on our consolidated balance sheets. As of December 31, 2019 and 2018, terms of the GSE CRT embedded derivatives are:



$ in thousands
Derivative Assets			Derivative Liabilities
	As of December 31, 2019	As of December 31, 2018		As of December 31, 2019	As of December 31, 2018
Balance Sheet	Fair Value	Fair Value	Balance Sheet	Fair Value	Fair Value
Interest Rate Swaps Asset	18,533	15,089	Interest Rate Swaps Liability	—	15,382
Currency Forward Contracts	—	—	Currency Forward Contracts	352	172
Futures Contracts	—	—	Futures Contracts	—	7,836
Total Derivative Assets	18,533	15,089	Total Derivative Liabilities	352	23,390



$ in thousands	Year ended December 31, 2019
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	—	20,833	(12,490	)	8,343



$ in thousands	Year ended December 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	—	22,478	(22,629	)	(151	)



$ in thousands	Year ended December 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	—	23,343	28,305	51,648

The following tables summarize the effect of interest rate swaps, futures contracts, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017.



$ in thousands	Year ended December 31, 2019
Derivative not designated as hedging instrument	Realized gain (loss) on derivative instruments, net		Contractual net interest income (expense)	Unrealized gain (loss), net		Gain (loss) on derivative instruments, net
Interest Rate Swaps	(440,626	)	35,840	18,826		(385,960	)
Future Contracts	(157,929	)	—	7,836		(150,093	)
Currency Forward Contracts	1,478		—	(180	)	1,298
Total	(597,077	)	35,840	26,482		(534,755	)



$ in thousands	Year ended December 31, 2018
Derivative not designated as hedging instrument	Realized gain (loss) on derivative instruments, net		Contractual net interest income (expense)		Unrealized gain (loss), net		Gain (loss) on derivative instruments, net
Interest Rate Swaps	81,417		(20,015	)	24,358		85,760
Future Contracts	(86,318	)	—		(7,836	)	(94,154	)
Currency Forward Contracts	2,088		—		1,046		3,134
TBAs	(17	)	—		—		(17	)
Total	(2,830	)	(20,015	)	17,568		(5,277	)



$ in thousands	Year ended December 31, 2017
Derivative not designated as hedging instrument	Realized gain (loss) on derivative instruments, net		Contractual net interest income (expense)		Unrealized gain (loss), net		Gain (loss) on derivative instruments, net
Interest Rate Swaps	72,894		(77,076	)	28,316		24,134
Currency Forward Contracts	(5,056	)	—		(923	)	(5,979	)
Total	67,838		(77,076	)	27,393		18,155