Let's now take a closer look at the two types of SOFR futures contracts, the one month and the three month SOFR futures. Both are standardized interest rate futures contracts built on SOFR, the secured overnight financing rate, which reflects the cost of overnight borrowing collateralized by US Treasury securities. And while the underlying rate is the same, the contracts differ in a few key ways. The reference period duration, the averaging method, and the contract size. First, the three month SOFR futures, these reference the compounded daily SOFR over a three month period, or more precisely over a reference quarter. That's the period from the third Wednesday of one IMM month to the third Wednesday of the next IMM month, excluding the final day. The term IMM refers to the standard settlement dates introduced by the International Monetary Markets, or IMM. A former division of the CME, the Chicago Mercantile Exchange. These dates, the third Wednesdays of March, June, September, and December, have become the globally accepted expiry cycle for many futures and options contracts. The contract size for three months, SOFR futures is $25 per basis point, and the future's price is quoted as 100 minus R, where R is the compounded daily SOFR over the reference period. Since a one basis point move in price reflects a one basis point change in the implied forward rate, the DV01 of the three month SOFR contract is $25. The final settlement price is based on a compounded rate. Using the formula shown here, it takes each day's SOFR, adjusts it for the number of days it applies to, and compounds it across the full reference period. Effectively, interest earned on one day is reinvested to earn interest on interest the next day. That's what makes compounding a more accurate reflection of actual funding costs or investment returns over the quarter. Now, contrast that with the one month SOFR futures, which use a simpler averaging method. Instead of compounding the one month contracts, simply use the arithmetic average of daily SOFR fixings over the delivery month. So for example, if the delivery month is July, We take each day's SOFR weighted by the number of calendar days it applies to, and average them out. That gives us R and again, the futures prices 100 minus R, but it's not just the averaging method and the period that are different. The contract size is different too. It's set at $41.67 per basis point, which again also represents the DV01 of the contract. So in summary, three month SOFR futures use compounded averaging and have a fixed DV01 of $25 one month SOFR futures use arithmetic averaging and have a fixed DV01 of $41.67. Both provide exposure to the SOFR curve, but the difference in averaging methods and durations affects how they behave and how precisely they match various hedging needs.