COMSTOCK RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Fair Value Measurements Certain accounts within the Company’s consolidated balance sheets are required to be measured at fair value. These include cash equivalents held in bank accounts, marketable securities and derivative financial instruments in the form of oil price swap agreements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A three-level hierarchy is followed for disclosure to show the extent and level of judgment used to estimate fair value measurements: Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active. Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument. Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The Company’s cash and marketable securities valuations are based on Level 1 measurements. The Company’s oil price swap agreements were not traded on a public exchange, and their value was determined utilizing a discounted cash flow model based on inputs that are readily available in public markets and, accordingly, the valuation of these swap agreements was categorized as a Level 2 measurement. The following table summarizes financial assets accounted for at fair value as of December 31, 2013: At December 31, 2013, the Company had oil price swap agreements covering 1,985,000 barrels of oil to be produced in 2014 with a fair value of $970,000. At December 31, 2012, the Company had oil price swap agreements for 2,160,000 barrels of oil to be produced in 2013 with a fair value of $11.7 million. F-11 Carrying Value Measured at Fair Value at December 31, 2013 Level 1 Level 2 (In thousands) Assets measured at fair value on a recurring basis: Cash held in bank accounts ....................... $2,967 $2,967 $ — Derivative financial instruments ................... 970 — 970 Total assets ................................ $3,937 $2,967 $ 970