Company: CIMO
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001409493-25-000028
Chunk: 129

Company: CHIMERA INVESTMENT CORP
Filing Date: 2025-11-06
Form: 10-Q
Item: Item 8
Chunk 129
---
 swaptions, the Company compares its own estimate of fair value with counterparty prices to evaluate for reasonableness. Both the clearing exchange and counter-party pricing quotes incorporate common market pricing methods, including a spread measurement to the Treasury yield curve or interest rate swap curve as well as underlying characteristics of the particular contract. Interest rate swaps and swaptions are modeled by the Company by incorporating such factors as the term to maturity, swap curve, overnight index swap rates, and the payment rates on the fixed portion of the interest rate swaps. The Company has classified the characteristics used to determine the fair value of interest rate swaps and swaptions as Level 2 inputs in the fair value hierarchy.Fair values of swaps with cancellable features are determined using valuation techniques appropriate for over‑the‑counter derivatives, including models incorporating observable market inputs (such as yield curves and volatility estimates) and, where observable inputs are not available, unobservable inputs, with resulting fair value measurements classified within the fair value hierarchy. This valuation is classified as Level 3 in the fair value hierarchy.Treasury FuturesThe fair value of Treasury futures is determined by quoted market prices in an active market. The Company has classified the characteristics used to determine the fair value of Treasury futures as Level 1 inputs in the fair value hierarchy.Swap FuturesThe fair value of Swap futures is determined using quoted settlement prices published by the ERIS Secured Overnight Financing Rate, which reflect observable market data for standardized CME-cleared contracts. The Company has classified the characteristics used to determine the fair value of Swap futures as Level 2 inputs in the fair value hierarchy.Interest rate capsThe fair value of interest rate caps is determined using a discounted cash flow approach that considers the difference between the forward curve of the reference rate and the cap's strike rate. The expected future cash flows from each caplet are calculated and discounted to present value using observable market interest rates. The discounted cashflows contemplate both an intrinsic value based upon the strike rate in reference to the market reference rate as well as a time value based upon the implied volatility of the market reference rate forward curve projection. This valuation is based on market inputs and is classified as Level 2 in the fair value hierarchy.Secured Financing AgreementsSecured financing agreements are collateralized financing transactions utilized by the Company to acquire investment securities. For short term secured financing agreements and longer term floating rate secured financing agreements, the Company estimates fair value using the contractual obligation plus accrued interest payable. The Company has classified the characteristics used to determine the fair value of secured financing agreements