Derivatives |
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives | 7. DERIVATIVES The Company has entered into interest rate swaps to help mitigate interest rate risk associated with the Company’s liabilities, as well as more closely align the interest rates of the Company’s fixed rate liabilities with its investment portfolio, which predominately consists of floating rate loans. In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or a similar agreement with its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Company and a counterparty that governs OTC derivatives, including interest rate swaps, and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty. The Company minimizes counterparty credit risk by only entering into agreements with counterparties that it believes to be in good standing and by monitoring the financial stability of those counterparties. The table below presents the average notional amounts, as an indicator for volume, for interest rate swaps:
The Company’s net exposure to interest rate swaps that are subject to ISDA Master Agreements or similar agreements presented on the Consolidated Statements of Assets and Liabilities, was as follows:
(1) Amount excludes excess cash collateral received or paid, if any. (2) Net amount represents the net amount due (to) from counterparty in the event of a default based on the contractual offset rights under the agreement. Net amount excludes any over-collateralized amounts, if applicable. Hedging The Company designated its interest rate swaps as the hedging instrument in a qualifying fair value hedging relationship for which it applies hedge accounting. For the interest rate swaps designated in qualifying fair value hedging relationships, the gains and losses on these interest rate swaps and the changes in the fair value of the hedged liabilities attributable to the risk being hedged (i.e. interest rate risk) are included in Interest and other debt expenses in the Consolidated Statements of Operations. The table below presents the impact to the Consolidated Statements of Operations from derivative assets and liabilities designated in a qualifying hedge accounting relationship:
The table below presents the carrying value of unsecured borrowings that are designated in a qualifying fair value hedging relationship and the related cumulative hedging adjustments (increase/(decrease)) from current and prior hedging relationships included in such carrying values:
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