glossary · what it means in a filing
also called level 1 · level 2 · level 3 · ASC 820
The fair value hierarchy sorts a holding by the kind of input used to price it: level 1 is a quoted price in an active market, level 2 is other observable input, and level 3 is an input that is not observable — a model.
Where it exists position by position, it comes from Form N-PORT, in which a registered fund states the level for each holding. A business development company does not file that form: its Schedule of Investments only marks securities valued with significant unobservable inputs with a symbol, and its financial statements report the levels in aggregate. The level is a declaration by the filer, not an assessment by anyone else — which is what makes it usable as a control: we read it, we never assign it.
Where filers declare the price observable, lenders land 27 basis points apart. Where they declare it comes from a model, they land 105 apart — 3.8 times wider, on loans matched by identical code, and the ratio holds across 14 quarters.