CMS Case Study

Derivatives Market Indications - 9/30/2020

Financial Institutions Group - Market Update

Friday, November 13, 2020

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 Chatham 3bps

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% 0.55% 0.60% 0.65% 0.70% 0.75% Strike

0.03% 0.06% 0.15% 0.32% 0.53% 1.05% 1.81% 0.03% 0.06% 0.17% 0.36% 0.58% 1.13% 1.92% 0.03% 0.08% 0.21% 0.40% 0.65% 1.22% 2.06% 0.04% 0.11% 0.26% 0.47% 0.73% 1.33% 2.21% 0.07% 0.17% 0.33% 0.56% 0.84% 1.47% 2.40% 0.11% 0.24% 0.42% 0.67% 0.96% 1.63% 2.60% 0.15% 0.32% 0.53% 0.80% 1.10% 1.81% 2.82% 0.20% 0.40% 0.64% 0.93% 1.26% 1.99% 3.05% 0.25% 0.49% 0.76% 1.07% 1.41% 2.18% 3.29% 0.30% 0.58% 0.88% 1.21% 1.58% 2.38% 3.53% 0.35% 0.68% 1.00% 1.36% 1.74% 2.58% 3.77% 0.40% 0.78% 1.14% 1.53% 1.93% 2.81% 4.05% 0.45% 0.87% 1.28% 1.70% 2.13% 3.05% 4.35% 0.05% 0.16% 0.43% 0.93% 1.71% 3.98% 8.21% 0.03% 0.12% 0.35% 0.82% 1.57% 3.77% 7.90% 0.03% 0.08% 0.29% 0.73% 1.44% 3.57% 7.61% 0.03% 0.06% 0.24% 0.65% 1.33% 3.40% 7.33% 0.03% 0.06% 0.21% 0.58% 1.23% 3.23% 7.07% 0.03% 0.06% 0.17% 0.52% 1.13% 3.07% 6.80% 0.03% 0.06% 0.14% 0.46% 1.04% 2.91% 6.55% 0.03% 0.06% 0.11% 0.41% 0.96% 2.76% 6.29% 0.03% 0.06% 0.10% 0.37% 0.90% 2.64% 6.08% 0.03% 0.06% 0.09% 0.34% 0.84% 2.53% 5.88% 0.03% 0.06% 0.09% 0.31% 0.79% 2.41% 5.68% 0.03% 0.06% 0.09% 0.29% 0.74% 2.31% 5.48% 0.03% 0.06% 0.09% 0.26% 0.69% 2.20% 5.29% 1m LIBOR Cap Pricing (% of Notional) Term 1 2 3 4 5 7 10

Amort

1m 1y

2y

0.20% 0.09% 0.04% 0.22% 0.09% 0.05% 0.22% 0.09% 0.05% 0.23% 0.09% 0.05% 0.23% 0.09% 0.05%

10y 15y 20y 25y 30y

Dealer 2bps

10y 15y 20y 25y 30y 3 Yr Swap 5 Yr Swap 20 Yr Swap 7 Yr Swap 10 Yr Swap 10y 15y 20y 25y 30y

Years to Option

Amort

1m 1y

2y

3y

4y

7y

8y

9y

10y

11y

0.39% 0.18% 0.12% 0.08% 0.04% 0.45% 0.20% 0.14% 0.09% 0.04% 0.48% 0.21% 0.15% 0.09% 0.05% 0.50% 0.22% 0.15% 0.10% 0.05% 0.52% 0.22% 0.15% 0.10% 0.05%

Years to Option

Amort

1m 1y

2y

3y

4y

5y

6y

0.45% 0.25% 0.18% 0.13% 0.09% 0.05% 0.02% 0.55% 0.30% 0.22% 0.16% 0.12% 0.07% 0.04% 0.61% 0.32% 0.24% 0.18% 0.13% 0.08% 0.04% 0.64% 0.33% 0.24% 0.18% 0.13% 0.09% 0.04% 0.66% 0.33% 0.25% 0.19% 0.14% 0.09% 0.04%

Years to Option

Amort

1m 1y

2y

3y

4y

5y

6y

7y

8y

9y

10y 0.49% 0.29% 0.21% 0.16% 0.11% 0.08% 0.05% 0.03% 0.01% 0.01% 15y 0.61% 0.39% 0.31% 0.25% 0.20% 0.15% 0.12% 0.08% 0.05% 0.02% 20y 0.67% 0.44% 0.35% 0.28% 0.23% 0.18% 0.14% 0.10% 0.07% 0.03% 25y 0.72% 0.46% 0.37% 0.30% 0.25% 0.20% 0.15% 0.11% 0.07% 0.04% 30y 0.75% 0.47% 0.38% 0.31% 0.26% 0.21% 0.16% 0.12% 0.08% 0.04%

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

*Indications reflectpricing based on a $10million notionalamount.All caps/floorsare subject to a transactioncost; for certaincaps/floors thiscostmay be greater than the economicvalue of the option.Please call for refined price indications. Transactions inover-the-counterderivatives (or “swaps”)have significant risks, including, but not limited to, substantial risk of loss. You should consultyourown business, legal, taxand accountingadvisers with respect toproposed swap transactionand you should refrain fromentering into any swap transactionunlessyouhave fully understood the terms and risksof the transaction, including the extentof yourpotential risk of loss.Thismaterial hasbeenprepared by a sales or trading employeeor agentof ChathamHedging Advisors and could be deemed a solicitation for entering into a derivatives transaction.Thismaterial isnot a research reportprepared by ChathamHedging Advisors. If you arenot an experienced userof thederivatives markets,capableof making independent trading decisions, then you shouldnot rely solely on this communication 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% 0.55% 0.46% 0.40% 0.34% 0.30% 0.26% 0.23% 0.20% 0.16% 25y 0.89% 0.67% 0.58% 0.52% 0.46% 0.42% 0.38% 0.34% 0.30% 0.27% 30y 0.96% 0.74% 0.65% 0.58% 0.53% 0.48% 0.44% 0.40% 0.36% 0.32%

Proprietary & Confidential

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