DERIVATIVE INSTRUMENTS

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

9. DERIVATIVE INSTRUMENTS

The Company uses derivative instruments primarily to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk.  The following is a breakdown of the derivatives outstanding as of December 31, 2016 and 2015 ($ in thousands):

December 31, 2016

			Fair Value				Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)
Futures
5-year Swap	$	602,200	$	3,210	$	2	0.25
10-year Swap	226,700		1,674		266		0.25
5-year U.S. Treasury Note	21,800		93		—		0.25
10-year U.S. Treasury Note Ultra	3,200		38		—		0.25
Total futures	853,900		5,015		268
Swaps
3 Month LIBOR(2)	50,000		—		2,697		3.72
Credit derivatives
CMBX	10,000		3		—		5.08
CDX	33,500		—		481		1.97
Total credit derivatives	43,500		3		481
Total derivatives	$	947,400	$	5,018	$	3,446

(1)  Shown as derivative instruments, at fair value, in the accompanying combined consolidated balance sheets.

(2) The Company is paying fixed interest rates on these swaps.

December 31, 2015

			Fair Value				Remaining Maturity (years)
Contract Type	Notional		Asset(1)		Liability(1)
Futures
5-year Swap	670,100		2,122		—		0.25
10-year Swap	477,900		463		1,451		0.25
5-year U.S. Treasury Note	800		3		—		0.25
10-year U.S. Treasury Note	600		3		—		0.25
Total futures	1,149,400		2,591		1,451
Swaps
3 Month LIBOR(2)	50,000		—		3,686		4.72
Credit Derivatives
CMBX	10,000		230		—		5.59
CDX	33,500		—		367		2.92
Total credit derivatives	43,500		230		367
Total derivatives	$	1,242,900	$	2,821	$	5,504

(1)  Shown as derivative instruments, at fair value, in the accompanying combined consolidated balance sheets.

(2) The Company is paying fixed interest rates on these swaps.

The following table indicates the net realized gains (losses) and unrealized appreciation (depreciation) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the combined consolidated statements of operations for the years ended December 31, 2016, 2015 and 2014($ in thousands):

	Year Ended December 31, 2016
	Unrealized Gain/(Loss)			Realized Gain/(Loss)			Net Result from Derivative Transactions
Contract Type
Futures	$	3,608		$	(3,954	)	$	(346	)
Swaps	956			(1,264		)	(308		)
Credit Derivatives	(340		)	(415		)	(755		)
Total	$	4,224		$	(5,633	)	$	(1,409	)

	Year Ended December 31, 2015
	Unrealized Gain/(Loss)		Realized Gain/(Loss)			Net Result from Derivative Transactions
Contract Type
Futures	$	9,214	$	(46,816	)	$	(37,602	)
Swaps	661		(1,992		)	(1,331		)
Credit Derivatives	307		(311		)	(4		)
Total	$	10,182	$	(49,119	)	$	(38,937	)

	Year Ended December 31, 2014
	Unrealized Gain/(Loss)			Realized Gain/(Loss)			Net Result from Derivative Transactions
Contract Type
Caps	$	—		$	(7	)	$	(7	)
Futures	$	(16,065	)	$	(74,946	)	$	(91,011	)
Swaps	1,780			(5,161		)	(3,381		)
Credit Derivatives	(86		)	(313		)	(399		)
Total	$	(14,371	)	$	(80,427	)	$	(94,798	)

The Company’s counterparties held $11.3 million and $18.9 million of cash margin as collateral for derivatives as of December 31, 2016 and 2015, respectively, which is included in cash collateral held by broker in the combined consolidated balance sheets.

Credit Risk-Related Contingent Features

The Company has agreements with certain of its derivative counterparties that contain a provision whereby, if the Company defaults on certain of its indebtedness, the Company could also be declared in default on its derivatives, resulting in an acceleration of payment under the derivatives.  As of December 31, 2016 and 2015, the Company was in compliance with these requirements and not in default on its indebtedness.  As of December 31, 2016 and 2015, there was $6.2 million and $5.9 million of cash collateral held by the derivative counterparties for these derivatives, respectively, included in cash collateral held by brokers in the combined consolidated statements of financial condition.  No additional cash would be required to be posted if the acceleration of payment under the derivatives was triggered.