Summary of Fair Value of Financial Instruments

Determining the estimated fair values of certain financial instruments such as notes receivable and indebtedness requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled.

The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):



	December 31, 2018				December 31, 2017
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial assets and liabilities measured at fair value:
Investment in Ashford Inc.	$	10,114	$	10,114	$	18,124	$	18,124
Derivative assets	772		772		594		594
Financial assets not measured at fair value:
Cash and cash equivalents	$	182,578	$	182,578	$	137,522	$	137,522
Restricted cash	75,910		75,910		47,820		47,820
Accounts receivable, net	12,739		12,739		14,334		14,334
Insurance receivable	—		—		8,825		8,825
Note receivable	—		—		8,098		8,020 to 8,864
Due from related party, net	—		—		349		349
Due from third-party hotel managers	4,927		4,927		4,589		4,589
Financial liabilities not measured at fair value:
Indebtedness	$	992,586	$936,904 to $1,035,526		$	826,236	$780,243 to $862,372
Accounts payable and accrued expenses	64,116		64,116		56,803		56,803
Dividends and distributions payable	8,514		8,514		8,146		8,146
Due to Ashford Inc.	4,001		4,001		1,703		1,703
Due to related party, net	224		224		—		—
Due to third-party hotel managers	1,633		1,633		1,709		1,709

Cash, cash equivalents and restricted cash. These financial assets have maturities of less than 90 days and most bear interest at market rates. The carrying value approximates fair value due to their short-term nature. This is considered a Level 1 valuation technique.

Accounts receivable, net, insurance receivable, due to/from related party, net, accounts payable and accrued expenses, dividends and distributions payable, due to Ashford Inc. and due to/from third-party hotel managers. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

Note receivable. Fair value of the note receivable was determined by using similar loans with similar collateral. Since there is very little to no trading activity, we relied on our internal analysis of what we believe a willing buyer would pay for this note at December 31, 2017. We estimated the fair value of the note receivable to be approximately 1.0% lower to 9.5% higher than the carrying value of $8.1 million at December 31, 2017. This is considered a Level 2 valuation technique.

Investment in Ashford Inc. Fair value of the investment in Ashford Inc. is based on the quoted closing price on the balance sheet date. This is considered a Level 1 valuation technique.

Derivative assets. Fair value of interest rate caps is determined using the net present value of expected cash flows of each derivative based on the market-based interest rate curve and adjusted for credit spreads of us and our counterparties. Fair value of credit default swaps are obtained from a third party who publishes the CMBX index composition and price data. Fair values of interest rate floors are calculated using a third-party discounted cash flow model based on future cash flows that are expected to be received over the remaining life of the floor. See notes 10 and 11 for a complete description of the methodology and assumptions utilized in determining fair values.

Indebtedness. Fair value of indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. Cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. We estimated the fair value of the total indebtedness to be approximately 94.4% to 104.3% of the carrying value of $992.6 million at December 31, 2018, and approximately 94.4% to 104.4% of the carrying value of $826.2 million at December 31, 2017. This is considered a Level 2 valuation technique.