Derivatives (Tables)

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments, Gain (Loss)

The table below provides detail of the Company’s “gain on derivative instruments, net” by type of derivative instrument for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Type of Derivative Instrument	2022		2021		2022		2021
U.S. Treasury futures	$	281,827	$	11,209	$	721,236	$	43,673
Interest rate swaptions	(4,202)		3,985		47,738		42,686
Options on U.S. Treasury futures	630		(3,226)		630		(2,141)
TBA securities	(181,308)		(2,365)		(346,034)		(19,755)
Gain on derivative instruments, net	$	96,947	$	9,603	$	423,570	$	64,463

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The table below provides the carrying amount by type of derivative instrument comprising the Company’s derivative assets and liabilities on its consolidated balance sheets as of the dates indicated:

Type of Derivative Instrument	Balance Sheet Location	Purpose	September 30, 2022		December 31, 2021
Interest rate swaptions	Derivative assets	Economic hedging	$	—	$	3,202
Options on U.S. Treasury futures	Derivative assets	Economic hedging	3,047		—
TBA securities	Derivative assets	Investing	10,818		4,767
Total derivatives assets			$	13,865	$	7,969
TBA securities	Derivative liabilities	Investing	$	99,670	—
Total derivatives liabilities			$	99,670	$	—

Schedule of Derivative Instruments

The following table summarizes information about the Company's long positions in TBA securities as of the dates indicated:

	September 30, 2022		December 31, 2021
Implied market value (1)	$	3,224,087	$	1,531,188
Implied cost basis (2)	3,312,939		1,526,421
Net carrying value (3)	$	(88,852)	$	4,767

(1) Implied market value represents the estimated fair value of the underlying Agency MBS as of the dates indicated.

(2) Implied cost basis represents the forward price to be paid for the underlying Agency MBS as of the dates indicated.

(3) Net carrying value is the amount included on the consolidated balance sheets within “derivative assets” and “derivative liabilities” and represents the difference between the implied market value and the implied cost basis of the TBA securities as of the dates indicated.

Schedule of Notional Amounts of Outstanding Derivative Positions

The table below summarizes changes in the Company’s derivative instruments for the nine months ended September 30, 2022:

Type of Derivative Instrument	Beginning Notional Amount-Long (Short)		Additions		Settlements, Terminations, or Pair-Offs		Ending Notional Amount-Long (Short)
Interest rate swaptions	$	500,000	$	—	$	(500,000)	$	—
U.S. Treasury futures	(3,890,000)		13,480,000		(14,750,000)		(5,160,000)
Options on U.S. Treasury futures	—		750,000		—		750,000
TBA securities	1,530,000		27,093,000		(25,104,000)		3,519,000

Offsetting Assets

The following tables present information regarding those derivative assets and liabilities subject to such arrangements as if the Company had presented them on a net basis as of September 30, 2022 and December 31, 2021:

	Offsetting of Assets
	Gross Amount of Recognized Assets		Gross Amount Offset in the Balance Sheet		Net Amount of Assets Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet (1)				Net Amount
							Financial Instruments Received as Collateral		Cash Received as Collateral
September 30, 2022
Options on U.S. Treasury futures	$	3,047	$	—	$	3,047	$	—	$	—	$	3,047
TBA securities	10,818		—		10,818		(10,818)		—		—
Derivative assets	$	13,865	$	—	$	13,865	$	(10,818)	$	—	$	3,047
December 31, 2021
Interest rate swaptions	$	3,202	$	—	$	3,202	$	—	$	(481)	$	2,721
TBA securities	4,767		—		4,767		—		(1,353)		3,414
Derivative assets	$	7,969	$	—	$	7,969	$	—	$	(1,834)	$	6,135

(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed in “cash collateral posted to/by counterparties.”

Offsetting Liabilities

	Offsetting of Liabilities
	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Balance Sheet		Net Amount of Liabilities Presented in the Balance Sheet		Gross Amount Not Offset in the Balance Sheet (1)				Net Amount
							Financial Instruments Posted as Collateral		Cash Posted as Collateral
September 30, 2022
TBA securities	$	99,670	$	—	$	99,670	$	(10,818)	$	(77,096)	$	11,756
Derivative liabilities	$	99,670	$	—	$	99,670	$	(10,818)	$	(77,096)	$	11,756
December 31, 2021
Derivative liabilities	$	—	$	—	$	—	$	—	$	—	$	—

(1) Amounts disclosed for collateral received by or posted to the same counterparty include cash and the fair value of MBS up to and not exceeding the net amount of the derivative asset or liability presented in the balance sheet. The fair value of the total collateral received by or posted to the same counterparty may exceed the amounts presented. Please refer to the consolidated balance sheets for the total fair value of financial instruments pledged as collateral for derivatives and repurchase agreements, which is shown parenthetically, and the total cash pledged or received as collateral which is disclosed in “cash collateral posted to/by counterparties.”