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## (4) Investments in Equity Securities 

At December 31, 2018 and 2017, investments in equity securities were as follows: 

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(1) Effective January 1, 2018, the Company adopted new accounting guidance that requires all equity investments with readily determinable fair values (subject to certain exceptions) to be measured at fair value, with changes in the fair value recognized through net income within net realized and unrealized gains on investments. Refer to Note 1 for additional information. 

## (5) Arbitrage Trading Account 

At December 31, 2018 and 2017, the fair value and carrying value of the arbitrage trading account were $453 million and $618 million, respectively. The primary focus of the trading account is merger arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Arbitrage investing differs from other types of investing in its focus 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 uses put options, call options and swap contracts in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options and contracts are reported at fair value. As of December 31, 2018, the fair value of long option contracts outstanding was $37 thousand (notional amount of $18.4 million) and the fair value of short option contracts outstanding was $58 thousand (notional amount of $11.6 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives. 

## (6) Net Investment Income 

Net investment income consists of the following: 

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