Morgan Stanley 2010 Annual Report Download - page 163

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial instruments owned—Corporate and other debt. During 2010, the Company reclassified
approximately $3.5 billion of certain Corporate and other debt, primarily loans and hybrid contracts, from Level
3 to Level 2. The Company reclassified these loans and hybrid contracts as external prices and/or spread inputs
became observable and the remaining unobservable inputs were deemed insignificant to the overall
measurement.
The Company also reclassified approximately $0.9 billion of certain Corporate and other debt from Level 2 to
Level 3. The reclassifications were primarily related to corporate loans and were generally due to a reduction in
market price quotations for these or comparable instruments, or a lack of available broker quotes, such that
unobservable inputs had to be utilized for the fair value measurement of these instruments.
Financial instruments owned—Net derivative and other contracts. The net losses in Net derivative and other
contracts were primarily driven by tightening of credit spreads on underlying reference entities of single name
and basket credit default swaps.
During 2010, the Company reclassified approximately $1.2 billion of certain Net derivative contracts from Level
3 to Level 2. These reclassifications were related to certain tranched bespoke basket credit default swaps and
single name credit default swaps for which unobservable inputs became insignificant.
Financial instruments owned—Investments. During 2010, the Company reclassified approximately $1 billion
from Level 3 to Level 2. The reclassifications were primarily related to principal investments for which external
prices became observable.
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