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Live Quotes - USD Swap Futures
Intro Video: Hedging with Eris SOFR
- 3-minute video from CME Group gives overview of using Eris SOFR for hedging exposure to interest rates
- Video shows a commercial loan example of a real estate developer borrowing money at a floating interest rate to fund a 5-year project, then using Eris SOFR to hedge against interest rate increases jeopardizing project profitability
- It’s an excellent introduction for other hedgers, as well, (e.g., bank balance sheet, mortgage pipeline, mortgage servicing rights), as it covers the basics of Eris SOFR product design and futures market operation
Perfect for Hedgers: Easy, low cost, transparent
Hedgers use Eris SOFR as an alternative to interest rate swaps. As futures contracts listed by CME Group, Eris SOFR offers market participants the economic performance of an interest rate swap and the advantages of using US future.
| Commercial Loans | Mortgage Pipeline | Mortgage Servicing Rights | Bank & Credit Union Asset/Liability Management | REIT's, Insurance & Fixed Income Portfolios | |
|---|---|---|---|---|---|
| Issue/Risk | Borrowers and lenders with commercial loans tied to SOFR may lose money as rates move | Rate risk after mortgage commitment and prior to securitization | Market value changes due to rate movement cause income statement volatility | Variable rate funding may reprice, causing losses from mismatched duration | Rate movements cause unrealized losses for bonds and other assets |
| Solution | Hedge against rate movements using Eris SOFR, IRS, other futures | Hedge risks using Eris SOFR, IRS, TBA MBS, Treasury Futures | Hedge risks using Eris SOFR, IRS, TBA MBS, Treasury Futures | Extend funding duration using Eris SOFR or IRS | Manage portfolio duration using Eris SOFR, IRS, Treasury Futures, interest rate caps |
| CME Group Article |  |  | |||
| Advantages of using Eris SOFR |
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Eris SOFR Overview
Futures contracts that replicate the cash flows and functionality of over-the-counter interest rate swaps, suitable for short-term trading or long-term hedging
- No physical delivery: contracts remain outstanding to underlying tenor maturity
- Initial Margin up to 65% lower than cleared interest rate swaps
- Trade in order book or bilateral block trades, in denominations as small as $100,000 notional (1 contract)
The Eris Methodology
The patented Eris Methodology allows for the creation of a listed futures contract that replicates the cash flows, convexity and functionality of traditional over-the-counter swaps.
As listed contracts, Eris Swap Futures are available to a wider user base as transparent financial instruments for easy trading and long term hedging purposes.
Eris Futures Price = 100 + A + B - C
About Eris Innovations
Eris Innovations is an intellectual property licensing company that partners with CME Group and other global exchanges to develop futures and options products based on its patented product design, the Eris Methodology
