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SOFR Futures Contract Duration and Basis Point Value

Article Quant Q&A · Author: SuavestArt
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Summary

The note concerns using CME SOFR futures for hedging and asks why a market-data field reports a duration of 0.25 across maturities. The response associates that quarter-year figure with three-month SOFR futures, whose underlying reference period spans about three months. It also distinguishes this duration field from basis point value, a separate measure of price sensitivity used to estimate the impact of a rate move on contract value.

The answer gives quoted BPV figures of 25 for three-month contracts and 41.67 for one-month contracts, and points readers toward contract specifications and a specialized reference book. It does not provide the requested numerical hedge construction, explain the duration calculation in detail, or show how hedge ratios change with the exposure. The figures are therefore pointers from the response, not a worked hedging example, and users should check current contract specifications.

Key ideas

  • The 0.25 duration figure is associated with a three-month SOFR futures reference period.
  • Basis point value is distinct from duration and describes sensitivity to rate changes.
  • The response reports different BPV figures for three-month and one-month contracts.
  • The note points to references but does not demonstrate a hedge calculation.

Tags

FuturesFixed incomeRisk management
Full text
# Using CME SOFR Futures in practice


# Using CME SOFR Futures in practice












I'm looking for numerical examples on how CME SOFR futures contracts are used in practice for hedging purposes. Book references containing this discussion are appreciated.

Bloomberg's FLDS function gives 0.25 as the contract duration for all maturities. What's the reasoning behind this?

## Answer by user68318 (score 1)

https://quant.stackexchange.com/a/76232

My current bedside reading: Wiley Finance's "SOFR Futures and Options" (Huggins and Schaller). Also, you can get 30% off by using CME's discount code here (https://www.cmegroup.com/markets/interest-rates/sofr-futures-and-options-guide.html).

I'll echo @Attack68 as to the 0.25 year length for 3-month CME SOFR futures. If you're referring to the BPV of the contracts, it's 25 for 3-month CME SOFR futures and 41.67 for 1-month CME SOFR futures, per the specs on CME's website (see e.g., https://www.cmegroup.com/trading/interest-rates/secured-overnight-financing-rate-futures.html).

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.