Capital One 2014 Annual Report Download - page 257

Significant Level 3 Fair Value Asset and Liability Input Sensitivity
Changes in unobservable inputs may have a significant impact on fair value. Certain of these unobservable
inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given
change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given
change in another input. In general, an increase in the discount rate, default rates, loss severity and credit spreads,
in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates
would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in
liquidity spreads.
Techniques and Inputs for Level 3 Fair Value Measurements
The following table presents the significant unobservable inputs relied upon to determine the fair values of our
recurring Level 3 financial instruments. We utilize multiple third-party pricing services to obtain fair value
measures for our securities. Several of our third-party pricing services are only able to provide unobservable input
information for a limited number of securities due to software licensing restrictions. Other third-party pricing
services are able to provide unobservable input information for all securities for which they provide a valuation.
As a result, the unobservable input information for the securities available for sale presented below represents a
composite summary of all information we are able to obtain for a majority of our securities. The unobservable
input information for all other Level 3 financial instruments is based on the assumptions used in our internal
valuation models.
235
CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Capital One Financial Corporation (COF)