Radian Group Inc. Notes to Consolidated Financial Statements - (Continued) VIEs  As a provider of credit enhancement, we have entered into insurance contracts with  VIEs and derivative contracts with  counterparties where we have provided credit protection directly on variable interests and, in some cases, obtained the  contractual rights of our counterparties with respect to the  VIEs. VIEs include corporations, trusts or partnerships in which  equity investors do not have a controlling financial interest or do not have suf ficient equity at risk to finance activities without  additional subordinated financial support. An entity is considered the primary beneficiary and is required to consolidate a  VIE if its variable interest: (i) gives it the  power to most significantly impact the economic performance of the  VIE; and (ii) has the obligation to absorb losses or the  right to receive residual benefits that could potentially be significant to the  VIE. For all VIEs in which we have a variable  interest, we determine whether we are the primary beneficiary . In determining whether we are the primary beneficiary , a  number of factors are considered, including the structure of the entity , provisions in our contracts that grant us additional rights  to influence or control the economic performance of the  VIE upon the occurrence of an event of default or a servicer  termination event or the breach of a performance trigger , and our obligation to absorb significant losses. Due to the continued  deterioration of the performance of many of our financial guaranty transactions, the breach of these performance tests or other  events giving rise to our right to influence or control the economic performance of the  VIE could occur. When we obtain  control rights, we perform an analysis to reassess our involvement with these  VIEs to determine whether we have become the  primary beneficiary.  Our estimated fair value measurements are intended to reflect the assumptions market participants would use in pricing  an asset or liability based on the best information available.  Assumptions include the risks inherent in a particular valuation  technique (such as a pricing model) and the risks inherent in the inputs to the model. Changes in economic conditions and  capital market conditions, including but not limited to, credit spread changes, benchmark interest rate changes, market volatility  and declines in the value of underlying collateral, could cause actual results to dif fer materially from our estimated fair value  measurements. We define fair value as the current amount that would be received to sell an asset or paid to transfer a liability in  an orderly transaction between market participants at the measurement date. In the event that our investments or derivative  contracts were sold, commuted, terminated or settled with a counterparty or transferred in a forced liquidation, the amounts  received or paid may be materially dif ferent from those determined in accordance with the accounting standard regarding fair  value measurements. Differences may also arise between our recorded fair value and the settlement or termination value with a  counterparty based upon consideration of information that may not be available to another market participant.  Those  differences, which may be material, are recorded as transaction realized gains/(losses) in our consolidated statements of  operations in the period in which the transaction occurs.  We have included the additional disclosures required by the update to the accounting standard regarding fair value  measurements and disclosures pertaining to the reconciliation of Level III fair value measurements. See Note 5 for additional  information. In May 2011, the Financial Accounting Standards Board (“FASB”) issued an update to the accounting standard regarding  fair value measurements and disclosure.  This update changes the language used to describe the requirements in GAAP  for  measuring fair value and for disclosing information about fair value measurements.  The amendments: (i) clarify the F ASB’s  intent about the application of existing fair value measurement and disclosure requirements; and (ii) change a particular  principle or requirement for measuring fair value or for disclosing information about fair value measurements.  The  amendments in this update do not require additional fair value measurements and are not intended to establish valuation  standards or affect valuation practices outside of financial reporting.  We adopted this standard ef fective January 1, 2012. The  adoption of this update did not have a significant impact on our fair value measurements.  Additional disclosures regarding  unobservable market inputs related to our Level III instruments required under this update are presented in Note 5 . When determining the fair value of our liabilities, we are required to incorporate into the fair value of those liabilities an  adjustment that reflects our own non-performance risk. Our CDS spread is an observable quantitative measure of our non- performance risk and is used by typical market participants to determine the likelihood of our default.  As our CDS spread  tightens or widens, it has the effect of increasing or decreasing, respectively , the fair value of our liabilities with a  corresponding impact on our results of operations. 182 Fair Value of Financial Instruments