The hierarchy gives priority to the inputs to a valuation technique, not to the technique itself. A Level 1 quoted price is used without adjustment when it is available. A fair value derived with a present value technique can be Level 2 or Level 3, depending on the level of the inputs that are significant to the measurement as a whole.
For example, if an OTC interest rate swap is valued by discounting with an observable interest rate curve, the measurement is Level 2. If unobservable inputs are significant, the same interest rate swap is Level 3.
The level is not set by the type of product. Derivatives of the same type fall into different levels depending on the inputs used.