The Euro Area’s Short-Term Rate (ESTR) Future Contract has as underlying asset the european overnight short-term rate (ESTR), calculated and published by the European Central Bank, between the trading date, inclusive, and the maturity date, exclusive, this product can be used to hedge and management risk of interest rate assets/liabilities referenced in ESTR rate.
The contract has as notional value of 100,000 at the maturity date, where each point values 0,2 euros (approximately BRL 100,000) and the unit price (PU) is 100,000 discounted the trading rate. As the position is daily updated by the ESTR rate through the update dynamics by the correction factor, the investor who carries the position until maturity receives daily adjustments that added together, will be equivalent to the difference between the fixed rate and the the over rate, in the financial amount of the trading.
The Volume-Weighted Average Price (VWAP) is the methodology used to calculate the contracts settlement prices, using a ten-minute window (1:05 pm to 1:15 pm). The algorithm avoids price distortions, even in high volatility scenarios, by pricing all maturities at the same time.
For more details on the product’s pricing model, visit the pricing manual by clicking here.