ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk. The fair value of the Company’s investments is subject to risks of fluctuations in credit quality and interest rates. The Company uses various models and stress test scenarios to monitor and manage interest rate risk. The Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the effective duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The effective duration for the fixed maturity portfolio (including cash and cash equivalents) was 2.8 years and 3.0 years at December 31, 2018 and 2017, respectively. In addition, the fair value of the Company’s international investments is subject to currency risk. The Company attempts to manage its currency risk by matching its foreign currency assets and liabilities where considered appropriate. The following table outlines the groups of fixed maturity securities and their effective duration at December 31, 2018: Duration is a common measure of the price sensitivity of fixed maturity securities to changes in interest rates. The Company determines the estimated change in fair value of the fixed maturity securities, assuming parallel shifts in the yield curve for treasury securities while keeping spreads between individual securities and treasury securities static. The estimated fair value at specified levels at December 31, 2018 would be as follows: Arbitrage investing differs from other types of investments in that its focus is on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general stock market conditions. Potential changes in market conditions are also mitigated by the implementation of hedging strategies, including short sales. Additionally, the arbitrage positions are generally hedged against market declines by purchasing put options, selling call options or entering into swap contracts. The Company's merger arbitrage securities are primarily exposed to the risk of completion of announced deals, which are subject to regulatory as well as transactional and other risks. Effective Duration ($ in thousands) (Years) Fair Value State and municipal 3.7 $ 3,952,038 Mortgage-backed securities 3.7 1,606,549 Corporate 3.4 4,111,311 U.S. government and government agencies 2.7 702,240 Foreign government 2.1 808,735 Loans receivable 1.0 97,073 Asset-backed securities 1.0 2,438,747 Cash and cash equivalents — 817,602 Total 2.8 $ 14,534,295 (In thousands) Estimated Fair Value Change in Fair Value Change in interest rates: 300 basis point rise $ 13,284,688 $ (1,249,608 ) 200 basis point rise 13,689,482 (844,814) 100 basis point rise 14,101,454 (432,842 ) Base scenario 14,534,295 — 100 basis point decline 14,912,897 378,601 200 basis point decline 15,291,638 757,342 300 basis point decline 15,449,791 915,495 54