Let's now take a look at EURIOBOR futures, one of the most established STIR futures contracts with nearly 30 years of trading history behind them. Like all futures contracts, EURIBOR futures are standardized where the key contract features are defined by the exchange that the contracts trade on first. The underlying EURIBOR futures reference three month EURIBOR. There are no six month EURIBOR futures contracts. So if investors want to hedge a single six month EURIBOR fixing FRAs are their only option. EURIBOR futures can't provide a clean hedge for that exposure.

The underlying rate is three month EURIBOR for the period starting on the third Wednesday of the contract month. So if we are looking at the December, 2025 contract, the relevant three month EURIBOR is the one covering the period starting Wednesday, the 17th of December, 2025. You might notice the contract expires on Monday the 15th of December, 2025. Why not on the 17th? That's because EURIBOR is fixed on a T plus two basis. So the fixing on 15th of December actually determines the rate for the period beginning 17th of December. And once the fixing is known, there's no more uncertainty. The futures contract has done its job and no longer needs to trade.

Now let's talk about the contract size. It's defined as 2,500 Euros multiplied by the contract price. So for example, if the December, 2025 EURIBOR future is trading at 98.06, the notional contract value is 2,500 Euros times 98.06, which gives us 245,150 Euros. Just to be clear, this is not the amount you'd have to deliver when trading the future. It's just a way of scaling the contract to determine how much your P&L will change with movements in interest rates.

Let's move on to have a look at a quick P&L exercise based on EURIBOR futures. Take a look at the example on screen. We're using the Z 25 EURIBOR future, that's the December, 2025 contract, which traded at 98.06 at the time the screenshot was taken. And we're given three simple questions. One, what is the implied forward rate for three month EURIBOR in December, 2025? Well, futures are quoted as 100 minus the forward rate. This contract is trading at 98.06, so the implied forward rate is 100 minus 98.06, which is 1.94%. That's the forward rate implied by the current futures price for three month EURIBOR starting in mid-December 2025.

Second question is if the DV01 per contract is 25 Euros, what is your position DV01, if you are long 500 contracts? This one is just a multiplication that's 25 Euros times 500 contracts, which gives us 12,500 Euros. So the portfolio DV01 is 12,500 Euros. That means for every one basis point move in the implied rate, your position's value changes by 12,500 Euros.

The third question is, if the future's price moves from 98.06 to 98.24, what's your P&L? That's a price move of 0.18 or 18 basis points. And since you're long and the price went up, you are making money. We multiply the move by the DV01 18 basis points times 12,500 Euros gives us 225,000 euros. You can also think of it in ticks. Each tick is 0.005. So 0.18 divided by 0.005 is 36 ticks and 36 ticks times 12.5 Euros times 500 contracts is 225,000 Euros. Either way, same result and a tidy gain from being long as the market rallied.