Morgan Stanley 2009 Annual Report Download - page 146

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(2) For positions with the same counterparty that cross over the levels of the fair value hierarchy, both counterparty netting and cash
collateral netting are included in the column titled “Counterparty and Cash Collateral Netting.” For contracts with the same counterparty,
counterparty netting among positions classified within the same level is included within that level. For further information on derivative
instruments and hedging activities, see Note 10.
(3) Amount represents MSRs accounted for at fair value. See Note 6 for further information on MSRs.
The following tables present additional information about Level 3 assets and liabilities measured at fair value on
a recurring basis for 2009, fiscal 2008, fiscal 2007 and the one month ended December 31, 2008. Level 3
instruments may be hedged with instruments classified in Level 1 and Level 2. As a result, the realized and
unrealized gains (losses) for assets and liabilities within the Level 3 category presented in the tables below do not
reflect the related realized and unrealized gains (losses) on hedging instruments that have been classified by the
Company within the Level 1 and/or Level 2 categories. Additionally, both observable and unobservable inputs
may be used to determine the fair value of positions that the Company has classified within the Level 3
category. As a result, the unrealized gains (losses) during the period for assets and liabilities within the Level
3 category presented in the tables below may include changes in fair value during the period that were
attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in
unobservable long-dated volatilities) inputs.
The following tables reflect gains (losses) for all assets and liabilities categorized as Level 3 for 2009, fiscal
2008, fiscal 2007 and the one month ended December 31, 2008, respectively. For assets and liabilities that were
transferred into Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been
transferred into Level 3 as of the beginning of the period; similarly, for assets and liabilities that were transferred
out of Level 3 during the period, gains (losses) are presented as if the assets or liabilities had been transferred out
as of the beginning of the period.
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