CMS Case Study

Derivatives Market Indications - 12/31/2020

Financial Institutions Group - Market Update

Friday, February 12, 2021

1m LIBOR Floor Pricing (% of Notional)

Estimated Cost to Cancel - 1M LIBOR Index - Modified Mortgage Amortization - Monthly Bermudan Options Cost Shown in Basis Points Running

Term

Strike

1

2

3

4

5

7

10

Years to Option

Bank Fee 30bps

0.00% 0.05% 0.10% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% 0.50% 0.55% 0.60% 0.15% 0.20% 0.25% 0.30% 0.35% 0.40% 0.45% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% Strike

0.03% 0.06% 0.13% 0.26% 0.42% 0.70% 1.26% 0.03% 0.07% 0.17% 0.30% 0.47% 0.77% 1.35% 0.03% 0.10% 0.21% 0.36% 0.54% 0.86% 1.46% 0.10% 0.23% 0.37% 0.55% 0.74% 1.10% 1.77% 0.15% 0.31% 0.47% 0.66% 0.87% 1.24% 1.94% 0.39% 0.58% 0.78% 1.00% 1.39% 2.12% 0.24% 0.48% 0.69% 0.91% 1.14% 1.55% 2.31% 0.29% 0.57% 0.81% 1.04% 1.28% 1.72% 2.51% 0.34% 0.66% 0.92% 1.17% 1.43% 1.88% 2.70% 0.19% 0.06% 0.16% 0.28% 0.45% 0.63% 0.97% 1.61%

Amort

1m 1y

2y

Chatham 3bps

0.26% 0.10% 0.04% 0.29% 0.10% 0.05% 0.31% 0.10% 0.05% 0.32% 0.10% 0.05% 0.33% 0.11% 0.05%

10y

Dealer 2bps

15y

20y

3 Yr Swap 5 Yr Swap

25y

30y

Years to Option

Amort

1m 1y

2y

3y

4y

7y

8y

9y

10y

11y

0.58% 0.20% 0.13% 0.08% 0.03% 0.72% 0.22% 0.15% 0.09% 0.04% 0.79% 0.23% 0.15% 0.09% 0.04% 0.83% 0.24% 0.16% 0.10% 0.04% 0.85% 0.24% 0.16% 0.10% 0.04%

10y

0.39% 0.75% 1.05% 1.31% 1.58%

2.05% 2.90%

15y

0.44% 0.85% 1.18% 1.46% 1.75% 2.24% 3.13% 0.49% 0.94% 1.31% 1.62% 1.93% 2.44% 3.37%

20y

25y

1m LIBOR Cap Pricing (% of Notional)

30y

Term

1

2

3

4

5

7

10

Years to Option

0.04% 0.16% 0.53%

1.31% 2.48% 5.64% 11.39%

Amort

1m 1y

2y

3y

4y

5y

6y

0.03% 0.13% 0.46% 1.20%

2.34% 5.42% 11.06%

0.61% 0.25% 0.17% 0.12% 0.08% 0.04% 0.02% 0.82% 0.30% 0.21% 0.15% 0.10% 0.06% 0.03% 0.94% 0.32% 0.23% 0.17% 0.11% 0.07% 0.03% 1.01% 0.33% 0.24% 0.17% 0.12% 0.07% 0.04% 1.05% 0.34% 0.25% 0.18% 0.12% 0.08% 0.04%

10y

0.03% 0.11% 0.41% 1.11% 2.21% 5.21% 10.75% 0.03% 0.09% 0.36% 1.03% 2.10% 5.02% 10.44% 0.03% 0.07% 0.32% 0.96% 1.98% 4.83% 10.14% 0.03% 0.06% 0.29% 0.89% 1.87% 4.64% 9.84% 0.03% 0.06% 0.26% 0.82% 1.77% 4.45% 9.55% 0.03% 0.06% 0.23% 0.75% 1.67% 4.27% 9.25% 0.03% 0.06% 0.15% 0.55% 1.29% 3.54% 8.01% 0.03% 0.06% 0.10% 0.39% 0.99% 2.88% 6.84% 0.03% 0.06% 0.09% 0.30% 0.78% 2.36% 5.86% 0.03% 0.06% 0.09% 0.23% 0.62% 1.91% 4.96%

15y

20y

25y 7 Yr Swap 10 Yr Swap 30y

Years to Option

Amort

1m 1y

2y

3y

4y

5y

6y

7y

8y

9y

10y 0.53% 0.26% 0.18% 0.13% 0.09% 0.06% 0.04% 0.02% 0.01% 0.01% 15y 0.75% 0.36% 0.27% 0.21% 0.17% 0.13% 0.10% 0.07% 0.04% 0.02% 20y 0.90% 0.41% 0.31% 0.25% 0.20% 0.16% 0.12% 0.09% 0.06% 0.03% 25y 0.99% 0.43% 0.34% 0.27% 0.22% 0.17% 0.13% 0.10% 0.06% 0.04% 30y 1.06% 0.45% 0.35% 0.28% 0.23% 0.18% 0.14% 0.10% 0.07% 0.04%

0.03% 0.06% 0.09% 0.19% 0.51%

1.58% 4.23%

1m LIBOR Structures - monthly resets/payments, ACT/360.

*Indications reflectpricing basedon a$10million notionalamount.All caps/floorsare subject toa transactioncost; for certain caps/floors thiscostmay begreater than theeconomicvalue of theoption.Please call for refinedprice indications. Transactions inover-the- counterderivatives (or “swaps”)have significant risks, including, butnot limited to, substantial risk of loss. You should consultyourown business, legal, taxandaccountingadvisers with respect toproposed swap transactionandyou should refrain from entering into any swap transactionunlessyouhave fully understood the terms and risksof the transaction, including theextentof yourpotential risk of loss.Thismaterial hasbeenpreparedby a sales or trading employeeor agentof ChathamHedging Advisors and couldbedeemeda solicitation for entering into a derivatives transaction.Thismaterial isnot a research reportprepared by ChathamHedging Advisors. If you arenot an experienceduserof thederivatives markets,capableof making independent trading decisions, thenyou shouldnot rely solely on thiscommunication in making trading decisions. Mortgage Amortization Rate is 5% Options pricing for out-of-the money strikes assumes an estimate of dealer minimum transaction fees.

Years to Option

Amort

1m 1y

2y

3y

4y

5y

6y

7y

8y

9y

20y 0.76% 0.49% 0.41% 0.35% 0.31% 0.27% 0.24% 0.21% 0.18% 0.15% 25y 0.87% 0.60% 0.52% 0.46% 0.41% 0.37% 0.34% 0.31% 0.28% 0.24% 30y 0.94% 0.66% 0.58% 0.52% 0.47% 0.43% 0.39% 0.36% 0.33% 0.29% 20 Yr Swap

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