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Derivative Instruments | 6 Months Ended
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Jun. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | 9. DERIVATIVE INSTRUMENTS The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017:
| Gross Amounts of Recognized Assets / Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet |  | Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet |  | Net Amount
June 30, 2018: |  |  |  |  |  |  |  |  |
Derivative Assets: |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 56,147 |  |  | $ | 161 |  |  | $ | 55,986 |  |  | $ | — |  |  | $ | 55,986 |
Futures contracts | 524 |  |  | — |  |  | 524 |  |  | — |  |  | 524 |
Total non-VIE derivative assets | $ | 56,671 |  |  | $ | 161 |  |  | $ | 56,510 |  |  | $ | — |  |  | $ | 56,510 |
Derivative Liabilities: |  |  |  |  |  |  |  |  |
Credit derivatives | $ | 1,326 |  |  | $ | — |  |  | $ | 1,326 |  |  | $ | — |  |  | $ | 1,326 |
Interest rate swaps | 66,483 |  |  | 161 |  |  | 66,322 |  |  | 65,563 |  |  | 759 |
Total non-VIE derivative liabilities | $ | 67,809 |  |  | $ | 161 |  |  | $ | 67,648 |  |  | $ | 65,563 |  |  | $ | 2,085 |
Variable Interest Entities Derivative Assets: |  |  |  |  |  |  |  |  |
Currency swaps | $ | 60,403 |  |  | $ | — |  |  | $ | 60,403 |  |  | $ | — |  |  | $ | 60,403 |
Total VIE derivative assets | $ | 60,403 |  |  | $ | — |  |  | $ | 60,403 |  |  | $ | — |  |  | $ | 60,403 |
Variable Interest Entities Derivative Liabilities: |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 1,992,227 |  |  | $ | — |  |  | $ | 1,992,227 |  |  | $ | — |  |  | $ | 1,992,227 |
Total VIE derivative liabilities | $ | 1,992,227 |  |  | $ | — |  |  | $ | 1,992,227 |  |  | $ | — |  |  | $ | 1,992,227 |
December 31, 2017: |  |  |  |  |  |  |  |  |
Derivative Assets: |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 73,826 |  |  | $ | 627 |  |  | $ | 73,199 |  |  | $ | — |  |  | $ | 73,199 |
Total non-VIE derivative assets | $ | 73,826 |  |  | $ | 627 |  |  | $ | 73,199 |  |  | $ | — |  |  | $ | 73,199 |
Derivative Liabilities: |  |  |  |  |  |  |  |  |
Credit derivatives | $ | 566 |  |  | $ | — |  |  | $ | 566 |  |  | $ | — |  |  | $ | 566 |
Interest rate swaps | 81,495 |  |  | 627 |  |  | 80,868 |  |  | 79,912 |  |  | 956 |
Futures contracts | 1,348 |  |  | — |  |  | 1,348 |  |  | 1,348 |  |  | — |
Total non-VIE derivative liabilities | $ | 83,409 |  |  | $ | 627 |  |  | $ | 82,782 |  |  | $ | 81,260 |  |  | $ | 1,522 |
Variable Interest Entities Derivative Assets: |  |  |  |  |  |  |  |  |
Currency swaps | $ | 54,877 |  |  | $ | — |  |  | $ | 54,877 |  |  | $ | — |  |  | $ | 54,877 |
Total VIE derivative assets | $ | 54,877 |  |  | $ | — |  |  | $ | 54,877 |  |  | $ | — |  |  | $ | 54,877 |
Variable Interest Entities Derivative Liabilities: |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 2,205,264 |  |  | $ | — |  |  | $ | 2,205,264 |  |  | $ | — |  |  | $ | 2,205,264 |
Total VIE derivative liabilities | $ | 2,205,264 |  |  | $ | — |  |  | $ | 2,205,264 |  |  | $ | — |  |  | $ | 2,205,264 |
Amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $21,060 and $20,926 as of June 30, 2018 and December 31, 2017, respectively. There were no amounts held representing an obligation to return cash collateral as of June 30, 2018 and December 31, 2017. The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the three and six months ended June 30, 2018 and 2017:
| Location of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss) |  | Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Non-VIEs: |  |  |  |  |  |  |  |  |  |  |
Credit derivatives | Net change in fair value of credit derivatives |  | $ | (217 | ) |  | $ | 6,624 |  |  | $ | (563 | ) |  | $ | 7,676 |
Non-VIE derivatives: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | Net gains (losses) on interest rate derivatives |  | 1,620 |  |  | 37,141 |  |  | 6,163 |  |  | 37,249 |
Futures contracts | Net gains (losses) on interest rate derivatives |  | 7,529 |  |  | (3,073 | ) |  | 28,523 |  |  | (4,695 | )
Total Non-VIE derivatives |  |  |  |  | 9,149 |  |  | 34,068 |  |  | 34,686 |  |  | 32,554 |
Variable Interest Entities: |  |  |  |  |  |  |  |  |  |  |
Currency swaps | Income (loss) on variable interest entities |  | 14,143 |  |  | (9,951 | ) |  | 5,526 |  |  | (14,899 | )
Interest rate swaps | Income (loss) on variable interest entities |  | 163,229 |  |  | 34 |  |  | 213,038 |  |  | 14,530 |
Total Variable Interest Entities |  |  | 177,372 |  |  | (9,917 | ) |  | 218,564 |  |  | (369 | )
Total derivative contracts |  |  | $ | 186,304 |  |  | $ | 30,775 |  |  | $ | 252,687 |  |  | $ | 39,861 |
Credit Derivatives: Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Upon a credit event, Ambac is required to make payments equal to the difference between the scheduled debt service payment and the actual payment made by the issuer. Credit derivatives issued are insured by Ambac Assurance. None of the outstanding credit derivative transactions at June 30, 2018 include ratings based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac. The portfolio of our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy execution, pay-as-you-go provides that Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation. Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. Independent rating agencies may have assigned different ratings on the credits in Ambac’s portfolio than Ambac’s internal ratings. The following table summarizes the gross principal notional outstanding for CDS contracts, by Ambac rating as of June 30, 2018 and December 31, 2017:
Ambac Rating |  | June 30, 2018 |  | December 31, 2017
AAA |  | $ | — |  |  | $ | — |
AA |  | 165,387 |  |  | 175,765 |
A |  | — |  |  | — |
BBB (1) |  | 145,850 |  |  | 150,125 |
Below investment grade (2) |  | — |  |  | — |
Total |  | $ | 311,237 |  |  | $ | 325,890 |
(1) | BBB internal ratings reflect bonds which are of medium grade credit quality with adequate capacity to pay interest and repay principal. Certain protective elements and margins may weaken under adverse economic conditions and changing circumstances. These bonds are more likely than higher rated bonds to exhibit unreliable protection levels over all cycles.
(2) | Below investment grade internal ratings reflect bonds which are of speculative grade credit quality with the adequacy of future margin levels for payment of interest and repayment of principal potentially adversely affected by major ongoing uncertainties or exposure to adverse conditions.
Interest Rate Derivatives: Ambac, through its subsidiary Ambac Financial Services (“AFS”), provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. Additionally, AFS uses interest rate derivatives as an economic hedge against the effects of rising interest rates elsewhere in the Company, including on Ambac’s financial guarantee exposures. As of June 30, 2018 and December 31, 2017 the notional amounts of AFS’s derivatives are as follows:
|  | Notional
Type of derivative |  | June 30, 2018 |  | December 31, 2017
Interest rate swaps—receive-fixed/pay-variable |  | $ | 375,951 |  |  | $ | 379,497 |
Interest rate swaps—pay-fixed/receive-variable |  | 1,463,331 |  |  | 1,428,264 |
US Treasury futures contracts—short |  | 1,805,000 |  |  | 1,655,000 |
Derivatives of Consolidated Variable Interest Entities Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of June 30, 2018 and December 31, 2017 are as follows:
|  | Notional
Type of VIE derivative |  | June 30, 2018 |  | December 31, 2017
Interest rate swaps—receive-fixed/pay-variable |  | $ | 1,447,493 |  |  | $ | 1,483,491 |
Interest rate swaps—pay-fixed/receive-variable |  | 2,396,479 |  |  | 2,479,244 |
Currency swaps |  | 371,038 |  |  | 394,541 |
Credit derivatives |  | 11,152 |  |  | 12,100 |
Contingent Features in Derivatives Related to Ambac Credit Risk Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and certain front-end counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given that Ambac Assurance is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions. As of June 30, 2018 and December 31, 2017, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $65,563 and $79,912, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $95,291 and $111,391, respectively. All such ratings-based contingent features have been triggered as requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated on June 30, 2018, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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