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Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table summarizes changes in the notional amount of our derivative instruments during 2019:



$ 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

Schedule of Interest Rate Swaps Outstanding

As of December 31, 2019, we had interest rate swaps with the following maturities outstanding:



$ 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


(1)	Notional amount includes $10.7 billion of interest rate swaps that receive variable payments based on 1-month LIBOR and $3.3 billion of interest rate swaps that receive variable payments based on 3-month LIBOR as of December 31, 2019.

(2)

Notional amount includes $6.7 billion of interest rate swaps that receive variable payments based on 1-month LIBOR and $5.7 billion of interest rate swaps that receive variable payments based on 3-month LIBOR as of December 31, 2018.

Schedule of Credit Derivatives

As of December 31, 2019 and 2018, terms of the GSE CRT embedded derivatives are:



$ in thousands	December 31, 2019	December 31, 2018
Fair value amount	10,281	22,771
Notional amount	464,966	526,912
Maximum potential amount of future undiscounted payments	464,966	526,912

Schedule of 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 our consolidated balance sheets as of December 31, 2019 and 2018.



$ 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

Schedule of Effect of Derivative Financial Instruments on Statement of Operations

The tables below present the effect of our credit derivatives on our 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), 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

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

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- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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