XML 24 R13.htm IDEA: XBRL DOCUMENT

Fair Value Disclosures

6 Months Ended

May 31, 2020

The following is a summary of our financial assets and liabilities that are accounted for at fair value on a recurring basis, excluding Investments at fair value based on net asset value ("NAV") of $912.9 million and $586.9 million at May 31, 2020 and November 30, 2019, respectively, by level within the fair value hierarchy (in thousands):


	May 31, 2020
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	2,586,764	$	61,387	$	76,140	$	—	$	2,724,291
Corporate debt securities	—		2,979,801		25,178		—		3,004,979
Collateralized debt obligations and collateralized loan obligations	—		68,748		31,551		—		100,299
U.S. government and federal agency securities	1,808,192		72,411		—		—		1,880,603
Municipal securities	—		462,420		—		—		462,420
Sovereign obligations	2,088,074		1,307,336		—		—		3,395,410
Residential mortgage-backed securities	—		1,688,379		22,339		—		1,710,718
Commercial mortgage-backed securities	—		355,161		4,461		—		359,622
Other asset-backed securities	—		292,158		86,062		—		378,220
Loans and other receivables	—		2,571,394		121,129		—		2,692,523
Derivatives	515		2,125,294		43,124		(1,528,340)		640,593
Investments at fair value	—		71,860		154,238		—		226,098
FXCM term loan	—		—		53,765		—		53,765

Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	6,483,545	$	12,056,349	$	617,987	$	(1,528,340)	$	17,629,541

Securities received as collateral, at fair value	$	9,909	$	—	$	—	$	—	$	9,909









Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	1,772,771	$	1,283	$	4,190	$	—	$	1,778,244
Corporate debt securities	—		1,491,089		163		—		1,491,252
U.S. government and federal agency securities	2,140,501		—		—		—		2,140,501

Sovereign obligations	1,132,662		878,059		—		—		2,010,721

Commercial mortgage-backed securities	—		—		140		—		140
Loans	—		1,796,591		10,674		—		1,807,265
Derivatives	277		2,012,251		88,255		(1,682,883)		417,900
Total financial instruments sold, not yet purchased, at fair value	$	5,046,211	$	6,179,273	$	103,422	$	(1,682,883)	$	9,646,023

Short-term borrowings	$	—	$	15,671	$	—	$	—	$	15,671
Long-term debt	$	—	$	748,446	$	497,040	$	—	$	1,245,486
Obligation to return securities received as collateral, at fair value	$	9,909	$	—	$	—	$	—	$	9,909


	November 30, 2019
	Level 1		Level 2		Level 3		Counterparty and Cash Collateral Netting (1)		Total
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	2,507,164	$	218,403	$	58,426	$	—	$	2,783,993
Corporate debt securities	—		2,472,245		7,490		—		2,479,735
Collateralized debt obligations and collateralized loan obligations	—		124,225		28,788		—		153,013
U.S. government and federal agency securities	2,101,624		158,618		—		—		2,260,242
Municipal securities	—		742,326		—		—		742,326
Sovereign obligations	1,330,026		1,405,827		—		—		2,735,853
Residential mortgage-backed securities	—		1,069,066		17,740		—		1,086,806
Commercial mortgage-backed securities	—		424,060		6,110		—		430,170
Other asset-backed securities	—		303,847		42,563		—		346,410
Loans and other receivables	—		2,460,551		114,080		—		2,574,631
Derivatives	2,809		1,833,907		14,889		(1,433,197)		418,408
Investments at fair value	—		32,688		205,412		—		238,100
FXCM term loan	—		—		59,120		—		59,120
Total financial instruments owned, at fair value, excluding investments at fair value based on NAV	$	5,941,623	$	11,245,763	$	554,618	$	(1,433,197)	$	16,308,807

Securities purchased under agreements to resell	$	—	$	—	$	25,000	$	—	$	25,000
Securities received as collateral, at fair value	$	9,500	$	—	$	—	$	—	$	9,500

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	2,755,601	$	7,438	$	4,487	$	—	$	2,767,526
Corporate debt securities	—		1,471,142		340		—		1,471,482
U.S. government and federal agency securities	1,851,981		—		—		—		1,851,981
Sovereign obligations	1,363,475		941,065		—		—		2,304,540
Commercial mortgage-backed securities	—		—		35		—		35
Loans	—		1,600,228		9,463		—		1,609,691
Derivatives	871		2,066,455		92,057		(1,632,178)		527,205
Total financial instruments sold, not yet purchased, at fair value	$	5,971,928	$	6,086,328	$	106,382	$	(1,632,178)	$	10,532,460

Short-term borrowings	$	—	$	20,981	$	—	$	—	$	20,981
Long-term debt	$	—	$	735,216	$	480,069	$	—	$	1,215,285
Obligation to return securities received as collateral, at fair value	$	9,500	$	—	$	—	$	—	$	9,500

(1)Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.

The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:

Corporate Equity Securities

•Exchange-Traded Equity Securities: Exchange-traded equity securities are measured based on quoted closing exchange prices, which are generally obtained from external pricing services, and are categorized within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value hierarchy. To the extent these securities are actively traded, valuation adjustments are not applied.

•Non-Exchange-Traded Equity Securities: Non-exchange-traded equity securities are measured primarily using broker quotations, pricing data from external pricing services and prices observed from recently executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity securities are categorized within Level 3 of the fair value hierarchy and measured using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/Earnings before interest, taxes, depreciation and amortization ("EBITDA"), price/book value), discounted cash flow analyses and transaction prices observed from subsequent financing or capital issuance by Jefferies Group. When using pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for differences between the measured security and the comparable security (e.g., issuer market capitalization, yield, dividend rate, geographical concentration).

•Equity Warrants: Non-exchange-traded equity warrants are measured primarily using pricing data from external pricing services, prices observed from recently executed market transactions and broker quotations and are categorized within Level 2 of the fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are generally categorized within Level 3 of the fair value hierarchy and can be measured using the Black-Scholes model with key inputs impacting the valuation including the underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity date.

Corporate Debt Securities

•Investment Grade Corporate Bonds: Investment grade corporate bonds are measured primarily using pricing data from external pricing services and broker quotations, where available, prices observed from recently executed market transactions and bond spreads or credit default swap spreads of the issuer adjusted for basis differences between the swap curve and the bond curve. Investment grade corporate bonds measured using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker quotes, pricing data or spread data is not available, alternative valuation techniques are used including cash flow models incorporating interest rate curves, single name or index credit default swap curves for comparable issuers and recovery rate assumptions. Investment grade corporate bonds measured using alternative valuation techniques are categorized within Level 2 or Level 3 of the fair value hierarchy and are a limited portion of our investment grade corporate bonds.

•High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily using broker quotations and pricing data from external pricing services, where available, and prices observed from recently executed market transactions of institutional size. Where pricing data is less observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on pending transactions involving the issuer or comparable issuers, prices implied from an issuer's subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows of the issuer and market prices for comparable issuers.

Collateralized Debt Obligations and Collateralized Loan Obligations

Collateralized debt obligations ("CDOs") and collateralized loan obligations ("CLOs") are measured based on prices observed from recently executed market transactions of the same or similar security or based on valuations received from third-party brokers or data providers and are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on recently executed market transactions of similar securities incorporates additional review and analysis of pricing inputs and comparability criteria, including, but not limited to, collateral type, tranche type, rating, origination year, prepayment rates, default rates and loss severity.

U.S. Government and Federal Agency Securities

•U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices obtained from external pricing services and categorized within Level 1 of the fair value hierarchy.

•U.S. Agency Debt Securities: Callable and non-callable U.S. agency debt securities are measured primarily based on quoted market prices obtained from external pricing services and are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Municipal Securities

Municipal securities are measured based on quoted prices obtained from external pricing services and are generally categorized within Level 2 of the fair value hierarchy.

Sovereign Obligations

Sovereign government obligations are measured based on quoted market prices obtained from external pricing services, where available, or recently executed independent transactions of comparable size. Sovereign government obligations, with consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy.

Residential Mortgage-Backed Securities

•Agency Residential Mortgage-Backed Securities: Agency residential mortgage-backed securities include mortgage pass-through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and interest-only (including inverse interest-only) securities. Agency residential mortgage-backed securities are generally measured using recent transactions, pricing data from external pricing services or expected future cash flow techniques that incorporate prepayment models and other prepayment assumptions to amortize the underlying mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We use prices observed from recently executed transactions to develop market-clearing spread and yield curve assumptions. Valuation inputs with regard to the underlying collateral incorporate factors such as weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan size, originator, servicer and weighted average loan age.

•Non-Agency Residential Mortgage-Backed Securities: The fair value of non-agency residential mortgage-backed securities is determined primarily using discounted cash flow methodologies and securities are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores; documentation type; geographic location; weighted average loan age; originator; servicer; historical prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield curves used in the discounted cash flow models are based on observed market prices for comparable securities and published interest rate data to estimate market yields. In addition, broker quotes, where available, are also referenced to compare prices primarily on interest-only securities.

Commercial Mortgage-Backed Securities

•Agency Commercial Mortgage-Backed Securities: Government National Mortgage Association ("GNMA") project loan bonds are measured based on inputs corroborated from and benchmarked to observed prices of recent securitization transactions of similar securities with adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates and cash flow structures, as well as the likelihood of pricing levels in the current market environment. Federal National Mortgage Association ("FNMA") Delegated Underwriting and Servicing ("DUS") mortgage-backed securities are generally measured by using prices observed from recently executed market transactions to estimate market-clearing spread levels for purposes of estimating fair value. GNMA project loan bonds and FNMA DUS mortgage-backed securities are categorized within Level 2 of the fair value hierarchy.

•Non-Agency Commercial Mortgage-Backed Securities: Non-agency commercial mortgage-backed securities are measured using pricing data obtained from external pricing services, prices observed from recently executed market transactions or based on expected cash flow models that incorporate underlying loan collateral characteristics and performance. Non-agency commercial mortgage-backed securities are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of the underlying inputs.

Other Asset-Backed Securities

Other asset-backed securities include, but are not limited to, securities backed by auto loans, credit card receivables, student loans and other consumer loans and are categorized within Level 2 or Level 3 of the fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing services, broker quotes and prices observed from recently executed market transactions. In addition, recent transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.

Loans and Other Receivables

•Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured based on market consensus pricing service quotations. Where available, market price quotations from external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are considered to be less transparent, market prices for debt securities of the same creditor and estimates of future cash flows incorporating assumptions regarding creditor default and recovery rates and consideration of the issuer's capital structure.

•Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency residential loans are based on observed market prices of recently executed purchases and sales of similar loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions and availability of data provider pricing.

•Project Loans and Participation Certificates in GNMA Project and Construction Loans: Valuations of participation certificates in GNMA project and construction loans are based on inputs corroborated from and benchmarked to observed prices of recent securitizations with similar underlying loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of the loans to account for the arbitrage that is realized at the time of securitization. The measurements are categorized within Level 2 of the fair value hierarchy given the observability and volume of recently executed transactions.

•Consumer Loans and Funding Facilities: Consumer and small business whole loans and related funding facilities are valued based on observed market transactions and incorporating valuation inputs including, but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.

•Escrow and Claim Receivables: Escrow and claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated based on reference to market prices and implied yields of debt securities of the same or similar issuers. Escrow and claim receivables are categorized within Level 2 of the fair value hierarchy where fair value is based on recent observations in the same receivable.

Derivatives

•Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using observable valuation inputs from the principal market or consensus pricing services. Exchange quotes and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes are validated directly through observable and tradeable quotes. Listed derivative contracts that use unadjusted exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed derivative contracts are generally categorized within Level 2 of the fair value hierarchy.

•Over-the-Counter ("OTC") Derivative Contracts: OTC derivative contracts are generally valued using models, whose inputs reflect assumptions that we believe market participants would use in valuing the derivative in a current transaction. Where available, valuation inputs are calibrated from observable market data. For many OTC derivative contracts, the valuation models do not involve material subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can be derived from actively quoted markets. OTC derivative contracts are primarily categorized within Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation models. Where significant inputs to the valuation are unobservable, derivative instruments are categorized within Level 3 of the fair value hierarchy.

OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using various valuation models, such as Black-Scholes, with key inputs including the underlying security price, foreign exchange spot rate, commodity price, implied volatility, dividend yield, interest rate curve, strike price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative contracts including the valuations of our interest rate swaps, which incorporate observable inputs related to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate observable inputs related to foreign currency spot rates and forward curves and valuations of our commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices and forward curves. Discounted cash flow models are also utilized to measure certain variable funding note swaps, which are backed by CLOs and incorporate constant prepayment rate, constant default rate and loss severity assumptions. Credit default swaps include both index and single-name credit default swaps. Where available, external data is used in measuring index credit default swaps and single-name credit default swaps. For commodity and equity total return swaps, market prices are generally observable for the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total return swaps executed on other underlyings are measured based on valuations received from external pricing services.

•Oil Futures Derivatives: Vitesse Energy Finance uses swaps and call and put options in order to reduce exposure to future oil price fluctuations. Vitesse Energy Finance accounts for the derivative instruments at fair value, which are classified as either Level 1 or Level 2 within the fair value hierarchy. Fair values classified as Level 1 are measured based on quoted closing exchange prices obtained from external pricing services and Level 2 are determined under the income valuation technique using an option-pricing model that is based on directly or indirectly observable inputs.

Investments at Fair Value

Investments at fair value include investments in hedge funds, fund of funds and private equity funds, which are measured at the NAV of the funds, provided by the fund managers and are excluded from the fair value hierarchy. Investments at fair value also include direct equity investments in private companies, which are measured at fair value using valuation techniques involving quoted prices of or market data for comparable companies, similar company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses, contingent claims analysis and transaction prices observed for subsequent financing or capital issuance by the company. Direct equity investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy.

The following tables present information about our investments in entities that have the characteristics of an investment company (in thousands):


	Fair Value (1)		Unfunded Commitments
May 31, 2020
Equity Long/Short Hedge Funds (2)	$	302,790	$	—
Equity Funds (3)	28,634		13,957
Commodity Fund (4)	13,593		—
Multi-asset Funds (5)	543,191		—
Other Funds (6)	24,728		—
Total	$	912,936	$	13,957

November 30, 2019
Equity Long/Short Hedge Funds (2)	$	291,593	$	—
Equity Funds (3)	44,576		14,621
Commodity Fund (4)	16,025		—
Multi-asset Funds (5)	234,583		—
Other Funds (6)	157		—
Total	$	586,934	$	14,621

(1)Where fair value is calculated based on NAV, fair value has been derived from each of the funds' capital statements.

(2)This category includes investments in hedge funds that invest, long and short, primarily in both public and private equity securities in domestic and international markets. At May 31, 2020 and November 30, 2019, 6% and 6%, respectively, of these investments are redeemable quarterly with 60 days prior written notice.

(3)The investments in this category include investments in equity funds that invest in the equity of various U.S. and foreign private companies. These investments cannot be redeemed; instead distributions are received through the liquidation of the underlying assets of the funds, which are expected to be liquidated in approximately one to nine years.

(4)This category includes investments in a hedge fund that invests, long and short, primarily in commodities. Investments in this category are redeemable quarterly with 60 days prior written notice.

(5)This category includes investments in hedge funds that invest, long and short, primarily in multi-asset securities in domestic and international markets in both the public and private sectors. At May 31, 2020 and November 30, 2019, investments representing approximately 58% and 5%, respectively, of the fair value of investments in this category are redeemable monthly with 30 or 60 days prior written notice.

(6)This category includes investments in a fund that trades and invests in structured finance securities. At May 31, 2020 and November 30, 2019, investments in this category representing approximately 99% and 0%, respectively, are redeemable quarterly with 12 months prior written notice.

Investments at fair value also include our investment in The We Company. We invested $9.0 million in The We Company in 2013 and currently own less than 1% of The We Company. Our interest in The We Company is reflected in Financial instruments owned, at fair value of $9.6 million and $53.8 million at May 31, 2020 and November 30, 2019, respectively.

Investment in FXCM

Our investment in FXCM and associated companies consists of a senior secured term loan due February 15, 2021 ($71.6 million principal outstanding at May 31, 2020), a 50% voting interest in FXCM and rights to a majority of all distributions in respect of the equity of FXCM. Our investment in the FXCM term loan is reported within Financial instruments owned, at fair value in the Consolidated Statements of Financial Condition. We classify our equity investment in FXCM in the Consolidated Statements of Financial Condition as Loans to and investments in associated companies, as we have the ability to significantly influence FXCM through our seats on the board of directors.

We estimate the fair value of our term loan by using a valuation model with inputs including management's assumptions concerning the amount and timing of expected cash flows, the loan's implied credit rating and effective yield. Because of these inputs and the degree of judgment involved, we have categorized our term loan within Level 3 of the fair value hierarchy.

Securities Purchased Under Agreements to Resell

Securities purchased under agreements to resell may include embedded call features. The valuation of these instruments is based on review of expected future cash flows, interest rates, funding spreads and the fair value of the underlying collateral. Securities purchased under agreements to resell are categorized within Level 3 of the fair value hierarchy due to limited observability of the embedded derivative and unobservable credit spreads.

Securities Received as Collateral/Obligations to Return Securities Received as Collateral

In connection with securities-for-securities transactions in which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the related obligation to return the collateral. Valuation is based on the price of the underlying security and is categorized within Level 1 of the fair value hierarchy.

Short-term Borrowings and Long-term Debt

Short-term borrowings that are accounted for at fair value include equity-linked notes, which are generally categorized within Level 2 of the fair value hierarchy, as the fair value is based on the price of the underlying equity security. Long-term debt includes variable rate, fixed-to-floating rate, constant maturity swap, digital and Bermudan structured notes. These are valued using various valuation models that incorporate Jefferies Group's own credit spread, market price quotations from external pricing sources referencing the appropriate interest rate curves, volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt notes are generally categorized within Level 2 of the fair value hierarchy, where market trades have been observed during the quarter, otherwise they are categorized within Level 3.

Nonrecurring Fair Value Measurements

HomeFed has a 49% membership interest in the RedSky JZ Fulton Investors ("RedSky JZ Fulton Mall") joint venture, which owns a property in Brooklyn, New York. The property consists of 14 separate tax lots, divided into two development sites which may be redeveloped with buildings consisting of up to 540,000 square feet of floor area development rights. During the three months ended February 29, 2020, difficulties were encountered with attempts to refinance debt within the investment. We viewed this, combined with a softening of the Brooklyn, New York real estate market during the quarter, as a triggering event and evaluated HomeFed's equity method investment in RedSky JZ Fulton Mall to determine if there was an impairment. In connection with this evaluation, we obtained an appraisal which reflected a reduction in the value of the investment in comparison to an earlier appraisal obtained shortly before the beginning of the quarter. The appraisal was based off of Level 3 inputs consisting of prices of comparable properties and the appraisal indicated that the value of the property was worth less than the debt outstanding. HomeFed recorded an impairment charge of $55.6 million within Income (loss) related to associated companies during the six months ended May 31, 2020, which represented all of its carrying value in the joint venture.

Due to a decline in oil and gas prices during the second quarter of 2020, Vitesse Energy Finance performed impairment analyses on its proven oil and gas properties in the Denver-Julesburg Basin ("DJ Basin") of Wyoming and Colorado and the Bakken Shale oil field in North Dakota. Vitesse Energy Finance first determined the estimated undiscounted cash flows based on the reserves and costs utilized in its reserve report and then updated those cash flows based on strip pricing as of May 31, 2020. The expected undiscounted future net cash flows were then compared to the end of quarter net carrying value of the oil and gas properties. No impairment of the Bakken Shale oil field assets was necessary as the undiscounted future net cash flows significantly exceeded the carrying value of these assets. As undiscounted future net cash flows were lower than the carrying value of the DJ Basin properties, Vitesse Energy Finance then determined the estimated fair value of the proven properties. To

measure the estimated fair value of its proven properties, Vitesse Energy Finance used unobservable Level 3 inputs, including a 10.0% discount rate and estimated future cash flows from its reserve report. The estimated fair value of Vitesse Energy Finance's proven oil and gas properties in the DJ Basin totaled $26.8 million, which was $13.2 million lower than the carrying value as of the end of the second quarter of 2020. As a result, an impairment charge of $13.2 million was recorded in Selling, general and other expenses during the three and six months ended May 31, 2020.

Due to a decline in oil and gas prices during the first quarter of 2020, JETX Energy performed an impairment analysis for its oil and gas properties in the East Eagle Ford. JETX Energy first determined the estimated undiscounted cash flows based on the reserves and costs utilized in its reserve report and then updated those cash flows based on strip pricing as of February 29, 2020. The expected undiscounted future net cash flows were then compared to the end of quarter net carrying value of the proven properties. As the undiscounted future net cash flows were lower than the carrying value, JETX Energy then determined the estimated fair value of the proven properties. To measure the estimated fair value of its proven properties, JETX Energy used unobservable Level 3 inputs, including a 10.0% discount rate and estimated future cash flows from its reserve report. The estimated fair value of JETX Energy's proven oil and gas properties in the East Eagle Ford totaled $9.6 million, which was $33.0 million lower than the carrying value as of the end of first quarter of 2020. As a result, an impairment charge of $33.0 million was recorded in Selling, general and other expenses during the six months ended May 31, 2020.

Level 3 Rollforwards

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the three months ended May 31, 2020 (in thousands):


Three Months Ended May 31, 2020
	Balance, February 29, 2020		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2020		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2020 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	103,683	$	(5,346)	$	63	$	(68)	$	—	$	—	$	(22,192)	$	76,140	$	(5,247)
Corporate debt securities	25,090		(1,480)		328		(365)		(1)		—		1,606		25,178		(1,464)
CDOs and CLOs	29,784		(12,374)		—		(8,471)		(2,598)		—		25,210		31,551		(16,451)


Residential mortgage-backed securities	16,970		(1,773)		1,380		—		(7)		—		5,769		22,339		(1,733)
Commercial mortgage-backed securities	4,264		53		—		—		—		—		144		4,461		53
Other asset-backed securities	41,903		(2,380)		11,038		—		(8,490)		—		43,991		86,062		(5,087)
Loans and other receivables	103,243		(1,113)		45,984		(46,939)		(128)		—		20,082		121,129		(1,069)
Investments at fair value	184,507		(59,962)		10,599		(91)		—		—		19,185		154,238		(59,962)
FXCM term loan	61,628		(7,863)		—		—		—		—		—		53,765		(7,863)


Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,275	$	(60)	$	—	$	—	$	—	$	—	$	(25)	$	4,190	$	60
Corporate debt securities	767		(23)		(20)		—		—		—		(561)		163		—

Commercial mortgage-backed securities	35		—		—		105		—		—		—		140		—
Loans	7,859		1,015		(2,785)		3,290		—		—		1,295		10,674		(1,015)
Net derivatives (2)	110,843		(32,744)		(10,810)		33,196		(603)		—		(54,751)		45,131		34,259
Long-term debt (1)	543,463		(92,480)		—		—		—		66,916		(20,859)		497,040		664

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2020 were gains of $91.8 million during the three months ended May 31, 2020.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2020

During the three months ended May 31, 2020, transfers of assets of $127.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Other asset-backed securities of $44.5 million, CDOs and CLOs of $29.6 million, loans and other receivables of $20.7 million and investments at fair value of $19.2 million due to reduced pricing transparency.

During the three months ended May 31, 2020, transfers of assets of $33.7 million from Level 3 to Level 2 are primarily attributed to:

•Corporate equity securities of $26.2 million and CDOs and CLOs of $4.4 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2020, transfers of liabilities of $23.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $11.4 million and structured notes of $11.1 million due to reduced pricing and market transparency.

During the three months ended May 31, 2020, transfers of liabilities of $98.6 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes of $31.9 million and net derivatives of $66.1 million due to greater pricing and market pricing transparency.

Net losses on Level 3 assets were $92.2 million and net gains on Level 3 liabilities were $124.3 million for the three months ended May 31, 2020. Net losses on Level 3 assets were primarily due to decreased market values across CDOs and CLOs, investments at fair value, corporate equity securities and the FXCM term loan. Net gains on Level 3 liabilities were primarily due to decreased valuations of certain structured notes and market values across derivatives.

The following is a summary of changes in fair value of our financial assets and liabilities that have been categorized within Level 3 of the fair value hierarchy for the six months ended May 31, 2020 (in thousands):


Six Months Ended May 31, 2020
	Balance, November 30, 2019		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2020		Changes in unrealized gains/losses included in earnings relating to instruments still held at May 31, 2020 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	58,426	$	(12,972)	$	3,016	$	(2,017)	$	—	$	—	$	29,687	$	76,140	$	(12,899)
Corporate debt securities	7,490		1,560		766		(479)		(602)		—		16,443		25,178		1,190
CDOs and CLOs	28,788		(13,589)		9,426		(11,849)		(4,122)		—		22,897		31,551		(17,410)


Residential mortgage-backed securities	17,740		(2,248)		2,062		—		(10)		—		4,795		22,339		(2,195)
Commercial mortgage-backed securities	6,110		(95)		—		—		(1,660)		—		106		4,461		(680)
Other asset-backed securities	42,563		(2,848)		33,917		(664)		(17,361)		—		30,455		86,062		(7,226)
Loans and other receivables	114,080		(5,348)		116,047		(76,227)		(56,998)		—		29,575		121,129		(8,989)
Investments at fair value	205,412		(86,594)		35,588		(168)		—		—		—		154,238		(86,594)
FXCM term loan	59,120		(5,355)		—		—		—		—		—		53,765		(5,355)
Securities purchased under agreements to resell	25,000		—		—		—		(25,000)		—		—		—		—

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	4,487	$	216	$	(513)	$	—	$	—	$	—	$	—	$	4,190	$	140
Corporate debt securities	340		(27)		(150)		—		—		—		—		163		5

Commercial mortgage-backed securities	35		—		(35)		140		—		—		—		140		—
Loans	9,463		1,072		(12,958)		3,290		—		—		9,807		10,674		(1,075)
Net derivatives (2)	77,168		(44,729)		(11,088)		38,823		(1,010)		—		(14,033)		45,131		32,211
Long-term debt (1)	480,069		(101,267)		—		—		—		175,498		(57,260)		497,040		(4,802)

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2020 were gains of $106.1 million during the six months ended May 31, 2020.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2020

During the six months ended May 31, 2020, transfers of assets of $148.5 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Corporate equity securities of $37.0 million, loans and other receivables of $33.5 million, other asset-backed securities of $31.1 million, CDOs and CLOs of $22.9 million and corporate debt securities of $18.3 million due to reduced pricing transparency.

During the six months ended May 31, 2020, transfers of assets of $14.6 million from Level 3 to Level 2 are primarily attributed to:

•Corporate equity securities of $7.3 million and loans and other receivables of $4.0 million due to greater pricing transparency supporting classification into Level 2.

During the six months ended May 31, 2020, transfers of liabilities of $37.0 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Net derivatives of $26.2 million and loans of $10.8 million due to reduced pricing transparency.

During the six months ended May 31, 2020, transfers of liabilities of $98.5 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes of $57.3 million and net derivatives of $40.2 million due to greater market and pricing transparency.

Net losses on Level 3 assets were $127.5 million and net gains on Level 3 liabilities were $144.7 million for the six months ended May 31, 2020. Net losses on Level 3 assets were primarily due to decreased market values across investments at fair value, CDOs and CLOs, corporate equity securities, the FXCM term loan and loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased valuations of certain structured notes and market values across derivatives.


Three Months Ended May 31, 2019
	Balance, February 28, 2019		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2019		Changes in unrealized gains/ losses included in earnings relating to instruments still held at May 31, 2019 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	55,576	$	1,808	$	221	$	(179)	$	(551)	$	—	$	2,697	$	59,572	$	1,909
Corporate debt securities	10,930		(306)		816		—		(325)		—		(2,769)		8,346		(307)
CDOs and CLOs	43,144		(1,663)		—		—		(991)		—		(14,578)		25,912		(2,656)


Residential mortgage-backed securities	20,963		(802)		—		—		(18)		—		(2,877)		17,266		(759)
Commercial mortgage-backed securities	12,820		(357)		—		(331)		(3,238)		—		3,636		12,530		(1,292)
Other asset-backed securities	35,886		3,070		16,531		(8,868)		(8,549)		—		5,115		43,185		3,563
Loans and other receivables	78,051		(2,753)		38,780		(13,898)		(2,438)		—		742		98,484		(1,277)
Investments at fair value	421,098		35,594		10,169		(18,302)		—		—		(39,820)		408,739		35,594
FXCM term loan	73,600		(11,412)		1,500		—		(7,088)		—		—		56,600		(11,412)
Securities purchased under agreements to resell	—		—		—		—		—		25,000		—		25,000		—

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	78	$	(74)	$	(1,520)	$	1,737	$	—	$	—	$	—	$	221	$	—
Corporate debt securities	730		(148)		(7)		1		22		—		71		669		90

Commercial mortgage-backed securities	70		(70)		—		—		—		—		—		—		—
Loans	3,420		(191)		(1,678)		1,537		—		—		6,340		9,428		364
Net derivatives (2)	28,975		(14,760)		(25)		4,175		1,974		—		27,110		47,449		7,565
Long-term debt (1)	283,139		1,163		—		—		(5,585)		39,385		(81,540)		236,562		(813)

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains/losses included in other comprehensive income (loss) for instruments still held at May 31, 2019 were losses of $0.4 million during the three months ended May 31, 2019.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the three months ended May 31, 2019

During the three months ended May 31, 2019, transfers of assets of $31.7 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $11.3 million and other asset-backed securities of $7.6 million due to reduced pricing transparency.

During the three months ended May 31, 2019, transfers of assets of $79.5 million from Level 3 to Level 2 are primarily attributed to:

•Investments at fair value of $39.8 million, CDOs and CLOs of $17.6 million and loans and other receivables of $10.5 million due to greater pricing transparency supporting classification into Level 2.

During the three months ended May 31, 2019, transfers of liabilities of $57.4 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Structured notes of $9.5 million and net derivatives of $41.5 million due to reduced market and pricing transparency.

During the three months ended May 31, 2019, transfers of liabilities of $105.4 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes of $91.0 million and net derivatives of $14.4 million due to greater market transparency.

Net gains on Level 3 assets were $23.2 million and net gains on Level 3 liabilities were $14.1 million for the three months ended May 31, 2019. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value and other asset-backed securities, partially offset by decreased market values in the FXCM term loan and across loans and other receivables. Net gains on Level 3 liabilities were primarily due to decreased market values across certain derivatives.


Six Months Ended May 31, 2019
	Balance, November 30, 2018		Total gains/ losses (realized and unrealized) (1)		Purchases		Sales		Settlements		Issuances		Net transfers into (out of) Level 3		Balance, May 31, 2019		Changes in unrealized gains/ losses included in earnings relating to instruments still held at May 31, 2019 (1)
Assets:
Financial instruments owned, at fair value:
Corporate equity securities	$	52,192	$	5,239	$	785	$	(2,031)	$	(720)	$	—	$	4,107	$	59,572	$	7,085
Corporate debt securities	9,484		(108)		2,181		(2,130)		(1,177)		—		96		8,346		(53)
CDOs and CLOs	36,105		(1,233)		4,782		—		(2,130)		—		(11,612)		25,912		(3,127)


Residential mortgage-backed securities	19,603		(316)		39		—		(45)		—		(2,015)		17,266		(271)
Commercial mortgage-backed securities	10,886		(180)		11		(331)		(3,278)		—		5,422		12,530		(1,183)
Other asset-backed securities	53,175		(1,014)		25,316		(13,247)		(9,529)		—		(11,516)		43,185		(522)
Loans and other receivables	46,985		2,434		77,004		(33,549)		(3,378)		—		8,988		98,484		844
Investments at fair value	396,254		29,454		41,512		(18,302)		—		—		(40,179)		408,739		29,454
FXCM term loan	73,150		(10,962)		1,500		—		(7,088)		—		—		56,600		(10,962)
Securities purchased under agreements to resell	—		—		—		—		—		25,000		—		25,000		—

Liabilities:
Financial instruments sold, not yet purchased, at fair value:
Corporate equity securities	$	—	$	(76)	$	(1,546)	$	1,843	$	—	$	—	$	—	$	221	$	—
Corporate debt securities	522		(382)		(73)		93		22		—		487		669		305


Loans	6,376		(401)		(3,946)		7,963		—		—		(564)		9,428		579
Net derivatives (2)	21,614		(29,079)		(2,829)		7,259		2,031		—		48,453		47,449		19,607
Long-term debt (1)	200,745		(12,854)		—		—		(11,250)		101,872		(41,951)		236,562		3,827

(1)Realized and unrealized gains/losses are primarily reported in Principal transactions revenues in the Consolidated Statements of Operations. Changes in instrument specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax. Changes in unrealized gains (losses) included in other comprehensive income (loss) for instruments still held at May 31, 2019 were gains of $9.0 million during the six months ended May 31, 2019.

(2)Net derivatives represent Financial instruments owned, at fair value - Derivatives and Financial instruments sold, not yet purchased, at fair value - Derivatives.

Analysis of Level 3 Assets and Liabilities for the six months ended May 31, 2019

During the six months ended May 31, 2019, transfers of assets of $42.3 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Loans and other receivables of $15.7 million and other asset-backed securities of $10.8 million due to reduced pricing transparency.

During the six months ended May 31, 2019, transfers of assets of $89.0 million from Level 3 to Level 2 are primarily attributed to:

•CDOs and CLOs of $12.5 million, other asset-backed securities of $22.3 million and investments at fair value of $40.2 million due to greater pricing transparency supporting classification into Level 2.

During the six months ended May 31, 2019, transfers of liabilities of $69.6 million from Level 2 to Level 3 of the fair value hierarchy are primarily attributed to:

•Structured notes of $10.3 million and net derivatives of $58.7 million due to reduced market and pricing transparency.

During the six months ended May 31, 2019, transfers of liabilities of $63.2 million from Level 3 to Level 2 of the fair value hierarchy are primarily attributed to:

•Structured notes of $52.3 million due to greater market transparency.

Net gains on Level 3 assets were $23.3 million and net gains on Level 3 liabilities were $42.8 million for the six months ended May 31, 2019. Net gains on Level 3 assets were primarily due to increased market values across investments at fair value and corporate equity securities, partially offset by decreased market values in the FXCM term loan and across CDOs and CLOs. Net gains on Level 3 liabilities were primarily due to decreased market values across derivatives and valuations of certain structured notes.

Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements

The tables below present information on the valuation techniques, significant unobservable inputs and their ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of unobservable inputs could differ significantly across different firms given the range of products across different firms in the financial services sector. The inputs are not representative of the inputs that could have been used in the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a particular class of financial instruments may not be appropriate for valuing other financial instruments within that given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in the underlying characteristics of the financial instruments in each category.

For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of the financial instruments comprising the category. We do not believe that the range or weighted average of the inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted average are driven by the individual financial instruments within each category and their relative distribution in the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial instrument as the population of financial instruments comprising the category will vary from period to period based on purchases and sales of financial instruments during the period as well as transfers into and out of Level 3 each period.


May 31, 2020
	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input/Range						Weighted Average
Financial instruments owned, at fair value
Corporate equity securities	$	75,712
Non-exchange-traded securities			Market approach	Price	$1		to	$213	$94
				Underlying stock price	$3						—
				EBITDA multiple	$3		to	$8	$4

Corporate debt securities	$	25,178	Market approach	Price	$69						—
			Scenario analysis	Estimated recovery percentage	22%						—

CDOs and CLOs	$	31,551	Discounted cash flows	Constant prepayment rate	10	%	to	20%	16	%
				Constant default rate	2%						—
				Loss severity	25	%	to	30%	28	%
				Discount rate/yield	14	%	to	32%	22	%
			Scenario analysis	Estimated recovery percentage	3	%	to	35%	24	%

Residential mortgage- backed securities	$	22,339	Discounted cash flows	Cumulative loss rate	3	%	to	33%	11	%
				Duration (years)	2.0 years		to	6.1 years	5.6 years
				Discount rate/yield	4	%	to	15%	5	%

Commercial mortgage- backed securities	$	4,461	Scenario analysis	Estimated recovery percentage	44%						—

Other asset-backed securities	$	86,062	Discounted cash flows	Cumulative loss rate	7	%	to	31%	14	%
				Duration (years)	0.4 years		to	2.8 years	1.4 years
				Discount rate/yield	5	%	to	15%	9	%
			Market approach	Price	$100						—

Loans and other receivables	$	67,207	Market approach	Price	$1		to	$100	$81
			Scenario analysis	Estimated recovery percentage	1	%	to	100%	61	%

Derivatives	$	41,769
Equity options			Volatility benchmarking	Volatility	49%						—
Interest rate swaps			Market approach	Basis points upfront	1		to	16	8

Investments at fair value	$	92,194
Private equity securities			Market approach	Price	$2		to	$169	$40
			Scenario analysis	Estimated recovery percentage	86%						—
				Discount rate/yield	19	%	to	21%	20	%
				Revenue growth	0%						—

Investment in FXCM	$	53,765
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	1.7 years	1.7 years




Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	4,190	Market approach	Transaction level	$1						—

Corporate debt securities	$	163	Scenario analysis	Estimated recovery percentage	22%						—

Loans	$	10,674	Market approach	Price	$1		to	$50	$33
			Scenario analysis	Estimated recovery percentage	1%						—

Derivatives	$	83,576
Equity options			Volatility benchmarking	Volatility	33	%	to	62%	47	%
Interest rate swaps			Market approach	Basis points upfront	0		to	16	7
Unfunded commitments				Price	$90						—

Long-term debt
Structured notes	$	497,040	Market approach	Price	$78		to	$94	$84
				Price	€63		to	€109	€85


November 30, 2019
	Fair Value (in thousands)		Valuation Technique	Significant Unobservable Input(s)	Input/Range						Weighted Average
Financial instruments owned, at fair value
Corporate equity securities	$	29,017
Non-exchange-traded securities			Market approach	Price	$1		to	$140	$55
				Underlying stock price	$3		to	$5	$4

Corporate debt securities	$	7,490	Scenario analysis	Estimated recovery percentage	23	%	to	85%	46	%
				Volatility	44%						—
				Credit spread	750						—
				Underlying stock price	£0.4						—

CDOs and CLOs	$	28,788	Discounted cash flows	Constant prepayment rate	20%						—
				Constant default rate	1	%	to	2%	2	%
				Loss severity	25	%	to	37%	29	%
				Discount rate/yield	12	%	to	21%	15	%
			Scenario analysis	Estimated recovery percentage	3.25	%	to	36.5%	25	%

Residential mortgage- backed securities	$	17,740	Discounted cash flows	Cumulative loss rate	2%						—
				Duration (years)	6.3 years						—
				Discount rate/yield	3%						—

Commercial mortgage- backed securities	$	6,110	Discounted cash flows	Cumulative loss rate	7.3%						—
				Duration (years)	0.2 years						—
				Discount rate/yield	85%						—
			Scenario analysis	Estimated recovery percentage	44%						—

Other asset-backed securities	$	42,563	Discounted cash flows	Cumulative loss rate	7	%	to	31%	16	%
				Duration (years)	0.5 years		to	3 years	1.5 years
				Discount rate/yield	7	%	to	15%	11	%

Loans and other receivables	$	112,574	Market approach	Price	$36		to	$100	$90
			Scenario analysis	Estimated recovery percentage	87	%	to	104%	99	%
			Discounted cash flows	Term based on the pay off (years)	0 months		to	0.1 years	0.1 years

Derivatives	$	13,826
Interest rate swaps			Market approach	Basis points upfront	0		to	16	6
Unfunded commitments				Price	$88						—
Equity options			Volatility benchmarking	Volatility	45%						—

Investments at fair value	$	157,504
Private equity securities			Market approach	Price	$8		to	$250	$80
			Scenario analysis	Discount rate/yield	19	%	to	21%	20	%
				Revenue growth	0%						—

Investment in FXCM	$	59,120
Term loan			Discounted cash flows	Term based on the pay off (years)	0 months		to	1.2 years	1.2 years

Securities purchased under agreements to resell	$	25,000	Market approach	Spread to 6 month LIBOR	500						—
				Duration (years)	1.5 years						—
Financial instruments sold, not yet purchased, at fair value
Corporate equity securities	$	4,487	Market approach	Transaction level	$1						—

Loans	$	9,463	Market approach	Price	$50		to	$100	$88
			Scenario analysis	Estimated recovery percentage	1%						—

Derivatives	$	92,057
Equity options			Volatility benchmarking	Volatility	21	%	to	61%	43	%
Interest rate swaps			Market approach	Basis points upfront	0		to	22	13
Cross currency swaps				Basis points upfront	2						—
Unfunded commitments				Price	$88						—

Long-term debt
Structured notes	$	480,069	Market approach	Price	$84		to	$108	$96
				Price	€74		to	€103	€91

The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing information, unadjusted past transaction prices or a percentage of the reported enterprise fair value are excluded from the above tables. At May 31, 2020 and November 30, 2019, asset exclusions consisted of $117.8 million and $79.9 million, respectively, primarily comprised of investments at fair value, corporate equity securities, certain derivatives and loans and other receivables. At May 31, 2020 and November 30, 2019, liability exclusions consisted of $4.8 million and $0.4 million, respectively, primarily comprised of certain derivatives, corporate debt and commercial mortgage-backed securities.

For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of the fair value measurement due to the use of significant unobservable inputs and interrelationships between those unobservable inputs (if any) are described below:

•Corporate equity securities, corporate debt securities, loans and other receivables, certain derivatives, other asset-backed securities, private equity securities, securities purchased under agreements to resell and structured notes using a market approach valuation technique. A significant increase (decrease) in the transaction level of corporate equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the price of the private equity securities, non-exchange-traded securities, unfunded commitments, corporate debt securities, other asset-backed securities, loans and other receivables or structured notes would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the EBITDA multiple related to corporate equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the underlying stock price of corporate equity securities would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the yield or duration, in isolation, of securities purchased under agreements to resell would result in a significantly lower (higher) fair value measurement. Depending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis points would result in a significant increase (decrease) in the fair value measurement of cross currency and interest rate swaps.

•Loans and other receivables, CDOs and CLOs, commercial mortgage-backed securities, corporate debt securities and private equity securities using scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying the financial instrument would result in a significantly higher (lower) fair value measurement for the financial instrument. A significant increase (decrease) in the price of the underlying assets of the financial instruments would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the volatility of the underlying stock price would result in a significantly higher (lower) fair value measurement. A significant increase (decrease) in the credit spread of the financial instrument would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the discount rate/yield underlying the investment would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the investment would result in a significantly higher (lower) fair value measurement.

•CDOs and CLOs, residential mortgage-backed securities, commercial mortgage-backed securities, other asset-backed securities, loans and other receivables and the FXCM term loan using a discounted cash flow valuation technique. A significant increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would result in a significantly lower (higher) fair value measurement. The impact of changes in the constant prepayment rate and duration would have differing impacts depending on the capital structure and type of security. A significant increase (decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement. A significant increase (decrease) in term based on the time to pay off the loan would result in a lower (higher) fair value measurement.

•Derivative equity options using volatility benchmarking. A significant increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.

Fair Value Option Election

We have elected the fair value option for all loans and loan commitments made by our investment banking and capital markets businesses. These loans and loan commitments include loans entered into by our investment banking division in connection with client bridge financing and loan syndications, loans purchased by our leveraged credit trading desk as part of our bank loan trading activities and mortgage and consumer loan commitments, purchases and fundings in connection with mortgage-backed and other asset-backed securitization activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed businesses are managed on a fair value basis. Loans are included in Financial instruments owned, at fair value and loan commitments are included in Financial instruments owned, at fair value and Financial instruments sold, not yet purchased, at fair value in the Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate entities are included in Loans to and investments in associated companies in the Consolidated Statements of Financial Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for certain of our

structured notes, which are managed by our investment banking and capital markets businesses and are included in Long-term debt and Short-term borrowings in the Consolidated Statements of Financial Condition. We have elected the fair value option for certain financial instruments held by subsidiaries as the investments are risk managed on a fair value basis. The fair value option may be elected for certain secured financings that arise in connection with our securitization activities and other structured financings. Other secured financings, receivables from brokers, dealers and clearing organizations, receivables from customers of securities operations, other receivables, payables to brokers, dealers and clearing organizations and payables to customers of securities operations, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded amounts approximate fair value due to their liquid or short-term nature.

The following is a summary of gains (losses) due to changes in instrument specific credit risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on long-term debt and short-term borrowings measured at fair value under the fair value option (in thousands):


	For the Three Months Ended						For the Six Months Ended
	May 31, 2020		May 31, 2019		May 31, 2020		May 31, 2019
Financial Instruments Owned, at fair value:
Loans and other receivables	$	(13,926)	$	(2,352)	$	(10,830)	$	(3,072)

Financial Instruments Sold, Not Yet Purchased, at fair value:
Loans	$	127	$	—	$	127	$	—
Loan commitments	1,750		(757)		1,089		(678)

Long-term Debt:
Changes in instrument specific credit risk (1)	$	197,737	$	4,009	$	227,169	$	27,492
Other changes in fair value (2)	(30,982)		(36,665)		(68,624)		(47,308)

Short-term borrowings:
Changes in instrument specific credit risk (1)	$	35	$	—	$	91	$	—
Other changes in fair value (2)	(644)		—		(881)		—

(1) Changes in instrument specific credit risk related to structured notes are included in the Consolidated Statements of Comprehensive Income (Loss), net of tax.

(2) Other changes in fair value are included in Principal transactions revenues in the Consolidated Statements of Operations.

The following is a summary of the amount by which contractual principal exceeds fair value for loans and other receivables, long-term debt and short-term borrowings measured at fair value under the fair value option (in thousands):


	May 31, 2020		November 30, 2019
Financial Instruments Owned, at fair value:
Loans and other receivables (1)	$	1,881,470	$	1,546,516

Loans and other receivables on nonaccrual status and/or 90 days or greater past due (1) (2)	331,340		197,215
Long-term debt and short-term borrowings	241,295		74,408

(1) Interest income is recognized separately from other changes in fair value and is included in Interest income in the Consolidated Statements of Operations.

(2) Amounts include all loans and other receivables 90 days or greater past due by which contractual principal exceeds fair value of $27.2 million and $22.2 million at May 31, 2020 and November 30, 2019, respectively.

The aggregate fair value of our loans and other receivables on nonaccrual status and/or 90 days or greater past due was $175.8 million and $127.0 million at May 31, 2020 and November 30, 2019, respectively, which includes loans and other receivables 90 days or greater past due of $16.6 million and $24.8 million at May 31, 2020 and November 30, 2019, respectively.

As of November 30, 2018, we owned 7,514,477 common shares of Spectrum Brands, representing approximately 15% of Spectrum Brands outstanding common shares. The change in the fair value of our investment in Spectrum Brands aggregated $(11.3) million and $24.7 million for the three and six months ended May 31, 2019. We distributed the Spectrum Brands shares

through a special pro rata dividend effective on October 11, 2019 to stockholders of record as of the close of business on September 30, 2019. We recorded a $451.1 million dividend as of the September 16, 2019 declaration date, which was equal to the fair value of Spectrum Brands shares at that time.

We believe accounting for these investments at fair value better reflects the economics of these investments, and quoted market prices for these investments provide an objectively determined fair value at each balance sheet date.

Financial Instruments Not Measured at Fair Value

Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations and would generally be presented in Level 1 of the fair value hierarchy. Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations includes U.S. Treasury securities with a fair value of $96.2 million and $35.0 million at May 31, 2020 and November 30, 2019, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details