Daily Settle Prices as of September 12, 2022

Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23

ZQU2 ZQV2 ZQX2 ZQZ2 ZQF3 ZQG3
97.4475 96.9400 96.4300 96.2350 96.1150 96.0200

Price Implied Rate

October (No FOMC) 96.9400 3.0600

Implied Monthly
Days % Days Price
Rate Change

Nov (End) 29 97% 96.4124 3.5876 0.5276

Nov (Avg) 96.4300 3.5700
Nov (Start) 1 3% 96.9400 3.0600
Start here --> October 96.9400 3.0600
Sept (End) 10 33% 96.9400 3.0600 0.7613
Sept (Avg) 97.4475 2.5525
Sept (Start) 20 67% 97.7013 2.2987

Methodology:
1. Get daily FF settlement prices by contract.
2. Find the nearest upcoming month without an FOMC meeting.
3. Avg. Month Price = Daily Settle Price
4. Because FFER(end)T-1 = FFER(beg)T, fill out those cells.
5. Calculate the adjacent FFER Start/End using the formulas above.
6. Calculate the Monthly Change for months with FOMC meetings (Col. G).
7. Calculate the # of 25bp hikes based off of Monthly Change (Col. H):
7.1. =((Monthly Change)/25)*100
7.2. Break down the number of 25bp hikes into full hikes and remainder [Use Trunc() and Mod(
8. We can start calculating the probability tree - start with the nearest FOMC meeting:
8.1. Start with the number of hikes indicated by the whole integer (2 = 50bp hike; 3 = 75bp hike
8.2. The probability of a hike of the size of the whole integer is = 1 - # Hike Remainder.
8.3. The probability of a hike 25bps larger than the expected hike size for the integer is simply =
9. We can now start calculating the Cumulative Probabilities, starting on the second upcoming FOMC
9.1. As a reminder, each successive FOMC month will add a branch to this probability tree. Tha
9.2 The joint probabilities are simple multiplications of the individual hike size Probs. (e.g. Prob(
 Mar-23 Apr-23 May-23 Jun-23 Jul-23 FFER End = [ (Avg. FFER) - (% days befor
ZQH3 ZQJ3 ZQK3 ZQM3 ZQN3 FFER Start = [ (Avg FFER) - (% days after
96.0050 95.9850 96.0050 96.0350 96.0650

Hike Size Probabilities Cumulative Probabilities

# of 25bp # Hikes 125bps 150bps
25bps 50bps 75bps 100bps
Hikes Breakdown (75 & 50) (75 & 75)

2.1103 2
0.1103 0 0.890 0.110 0 0.850 0.105

3.0450 3
0.0450 0 0 0.955 0.045

Current Target Ra
Target Rat
300 - 325
(+75)
Sept. 2022 95.5%
Nov. 2022 0.0%

emainder [Use Trunc() and Mod()].

st FOMC meeting:
ger (2 = 50bp hike; 3 = 75bp hike, etc.).
= 1 - # Hike Remainder.
ke size for the integer is simply = # Hike Remainder.
g on the second upcoming FOMC month:
ranch to this probability tree. That means one or more extra probability to calculate.
idual hike size Probs. (e.g. Prob(50bps)T-1 * Prob(50bps)T).
Avg. FFER) - (% days before meet.)*(FFER Start) ] / (% days after meet.)
(Avg FFER) - (% days after meet.)*(FFER End) ] / (% days before meet.)

umulative Probabilities
150bps 175bps
(100 & 50) (100 & 75)

0.040 0.005

Current Target Rate: 225 - 250 bps

Target Rate Range
325 - 350 350 - 375 375 - 400 400 - 425
(+100) (+125) (+150) (+175)
4.5% 0.0% 0.0% 0.0%
0.0% 85.0% 14.5% 0.5%