Morgan Stanley 2014 Annual Report Download - page 188

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis.
The following tables present additional information about Level 3 assets and liabilities measured at fair value on
a recurring basis for 2014, 2013 and 2012, respectively. 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.
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 at 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 at the beginning of the period.
184