Company: ADAMM
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0001273685-25-000028
Chunk: 26

Company: ADAMAS TRUST, INC.
Filing Date: 2025-02-21
Form: 10-K
Item: Item 1
Chunk 26
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 have U.S. Treasury future contracts that obligate us to sell or buy U.S. Treasury securities for future delivery. We have purchased credit default swap index contracts under which a counterparty, in exchange for a premium, agrees to compensate us for the financial loss associated with the occurrence of a credit event in relation to a notional value of an index. We may purchase equity index put options that give us the right to sell or buy the underlying index at a specified strike price. We may also purchase credit default swap index options that allow us to enter into a fixed rate payor position in the underlying credit default swap index at the agreed-upon strike level.

In connection with our hedging strategy, we utilize model-based risk analysis to assist in projecting individual asset price and cash flow sensitivities over a variety of different interest rates and market scenarios, such as shifts in interest rates, changes in prepayments and other factors impacting the valuations of our assets and liabilities. 

As it relates to the variable-rate mortgages payable in our Consolidated Real Estate VIEs, the joint venture entities may be required by the lender to enter into interest rate cap contracts. In addition, with respect to one of our financings under repurchase agreements, the lender has, in the past, required us to enter into an interest rate cap contract.  These interest rate cap contracts are with a counterparty that involve the receipt of variable-rate amounts from the counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. 

Competition

We believe that our principal competitors in the business of acquiring and holding mortgage-related single-family and multi-family residential assets of the types in which we invest are financial institutions, such as banks, specialty finance companies, insurance companies, institutional investors, including mutual funds and pension funds, hedge funds and other mortgage REITs. Some of these entities may not be subject to the same regulatory constraints (i.e., REIT compliance or maintaining an exclusion from registration under the Investment Company Act) as we are. In addition, many of these entities have greater financial resources and access to capital than we have. The existence of these entities, as well as the possibility of additional entities forming in the future, may increase the competition for the acquisition of residential mortgage assets, resulting in higher prices and lower yields on such assets.

Human Capital

As of December 31, 2024, we had 70 full-time employees located in offices in New York, New York, Charlotte, North Carolina and Woodland Hills, California