Hybrid securities —These instruments are convertible securities. The estimated fair value is derived, in part, by utilizing  dealer quotes and observed bond and stock prices. For certain securities, the underlying security price may be adjusted to  account for observable changes in the conversion and investment value from the time the quote was obtained.  These securities  are categorized in Level II of the fair value hierarchy . Equity securities —The fair value of these securities is generally estimated using observable market data in active markets  or bid prices from market makers and broker -dealers. Generally, these securities are categorized in Level I or II of the fair value  hierarchy, as observable market data are readily available.  A small number of our equity securities, however , are categorized in  Level III of the fair value hierarchy due to a lack of market-based transaction data or the use of model-based evaluations. Other investments —These securities primarily consist of deposit investments and short-term  CDs, which are categorized  in Level II and Level III of the fair value hierarchy , and a guaranteed investment contract held by one of our consolidated  VIEs,  which is categorized in Level III of the fair value hierarchy . The fair value of the Level III securities is generally estimated by  discounting estimated future cash flows. We define fair value as the current amount that would be exchanged to sell an asset or transfer a liability , other than in a  forced liquidation. In determining an exit market, we consider the fact that most of our derivative contracts are unconditional  and irrevocable and contractually prohibit us from transferring them to other capital market participants.  Accordingly, there is  no principal market for such highly structured insured credit derivatives. In the absence of a principal market, we value these  insured credit derivatives in a hypothetical market where market participants include other monoline mortgage and financial  guaranty insurers with similar credit quality to us, as if the risk of loss on these contracts could be transferred to these other  mortgage and financial guaranty insurance and reinsurance companies.  We believe that in the absence of a principal market,  this hypothetical market provides the most relevant information with respect to fair value estimates. We determine the fair value of our derivative instruments primarily using internally-generated models.  We utilize market  observable inputs, such as credit spreads on similar products, whenever they are available.  When one of our transactions  develops characteristics that are inconsistent with the characteristics of transactions that underlie the relevant market-based  index that we use in our credit spread valuation approach, and more relevant inputs or projections become available and would  represent the view of a typical market participant, we change to an approach that is based on that more relevant available  information. This change in approach is generally prompted when the credit component, and not market factors, becomes the  dominant driver of the estimated fair value for a particular transaction.  There is a high degree of uncertainty about our fair  value estimates since our contracts are not traded or exchanged, which makes external validation and corroboration of our  estimates difficult, particularly given the current market environment, in which very few , if any, contracts are being traded or  originated.  Our derivative liabilities valuation methodology incorporates our own non-performance risk by including our observable  CDS spread as an input into the determination of the fair value of our derivative liabilities. Considerable judgment is required  to interpret market data to develop the estimates of fair value.  Accordingly, the estimates may not be indicative of amounts we  could realize in a current market exchange or negotiated termination. Our derivative liability valuation is not counterparty  specific and is intended to estimate the average exchange price between typical participants.  The use of different market  assumptions or estimation methodologies may have a material ef fect on the estimated fair value amounts or negotiated  terminations. In a negotiated termination, certain factors unique to the counterparty may have a greater impact on the amount  exchanged than in an estimated fair value amount between typical market participants and another market participant could  have materially different views given the level of judgment associated with the valuation.  Derivative Instruments and Related VIE Assets/Liabilities 196 Radian Group Inc. Notes to Consolidated Financial Statements - (Continued)