SunTrust 2013 Annual Report Download - page 191

Notes to Consolidated Financial Statements, continued
175
The classification of an instrument as level 3 involves judgment and is based on a variety of subjective factors. These factors
are used in the assessment of whether a market is inactive, resulting in the application of significant unobservable assumptions
in the valuation of a financial instrument. A market is considered inactive if significant decreases in the volume and level of
activity for the asset or liability have been observed. In determining whether a market is inactive, the Company evaluates such
factors as the number of recent transactions in either the primary or secondary markets, whether price quotations are current,
the nature of the market participants, the variability of price quotations, the significance of bid/ask spreads, declines in (or
the absence of) new issuances, and the availability of public information. Inactive markets necessitate the use of additional
judgment in valuing financial instruments, such as pricing matrices, cash flow modeling, and the selection of an appropriate
discount rate. The assumptions used to estimate the value of an instrument where the market was inactive are based on the
Company’s assessment of the assumptions a market participant would use to value the instrument in an orderly transaction
and includes consideration of illiquidity in the current market environment.