v3.26.3
Note 5 - Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2026
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

 

5.         Derivative Financial Instruments

 

The Company hedges a portion of its interest rate exposure by entering into interest rate futures contracts. Interest rate futures contracts are exchange-traded agreements that can be settled in cash based on interest rate movements at a future date. Due to the fact that interest rate futures contracts are exchange traded, there is minimal counterparty risk because the clearing house guarantees against default.

 

The unrealized gain or loss is equal to the value of the contract on the period-end date and changes to the value are recorded in net changes in unrealized gain or loss on investments in the consolidated statement of operations.

 

Notional amounts are the underlying reference amounts to indices or equities upon which the fair value of the derivative contracts traded by the Company are based. While notional amounts do not represent the current fair value and are not necessarily indicative of the future cash flows of the Company’s derivative contracts, the underlying price changes in relation to the variables specified by the notional amounts affect the fair value of these derivative financial instruments.

 

The following table sets forth the derivative instruments presented on the consolidated balance sheet and notional amounts as of  September 30, 2026:

 

 

 

Derivatives Not Designated as Hedging Instruments

 

 

Number of Contracts

 

 

Assets (1)

 

 

Liabilities

 

 

Long Exposure

 

 

Short Exposure

 

September 30, 2026

 

Interest rate futures

 

 

 

8

 

 

$

2,968,714

 

 

$

—

 

 

$

—

 

 

$

81,230,041

 

 

The gains arising from these derivative instruments in the consolidated statement of operations for the nine months ended  September 30, 2026 are set forth as follows:

 

 

 

 

 

 

 

 

 

Net Change in Unrealized

 

 

 

Derivatives Not Designated

 

Net Realized Gains (Losses)

 

 

Appreciation (Depreciation)

 

 

 

as Hedging Instruments

 

on Derivative Instruments

 

 

on Derivative Instruments (2)

 

September 30, 2026

 

Interest rate futures

 

$

—

 

 

$

2,968,714

 

 

The Company held no derivative instruments as of December 31, 2025 or for the nine months ended  September 30, 2025.

 

FOOTNOTES:

 

(1)

Amounts related to the interest rate futures held by the Company are recorded at fair value and included in other assets in the accompanying consolidated balance sheets.

 

(2)

Amounts related to the interest rate futures held by the Company are recorded at fair value and included in unrealized loss on residential mortgage loans, mortgage servicing rights investments and derivatives, net in the accompanying consolidated statement of operations.