FOMC-CME GROUP… Understanding CME GROUP FedWatch Tools and Fed Funds Futures Probability Tree Calculator,the Methodology:The status quo,then the probabilities of a rate hike versus no rate hike would be calculated as:P(Hike)=[FFER(end of month)-FFER(start of month)]/25 basic points P(NoHike)=1-P(Hike) Example,September 17,2015 FOMC-Type #2 FFQ5=99.8675 FFU5=99.805 N=30 M=16 FFER(start)=0.1325(100-99.8675) ImpliedRate=0.195(100-99.805) FFER(end)=30/14*[0.195 – (16/30)*0.1325]=0.26643 P(Hike)=(0.26643 – 0.1325)/0.25=53.6% P(NoHike)=46.4% The equations are as follows²: P(FFER decreased)=Probability(FFER Decrease previous) * (1-Probability of a rate change) P(FFER unchanged)=Probability(FFTR increase previous)*(1-Probability of rate change)+(Probability of a FFTR decrease previous)*(Probability of a rate change) P(FFER increased)=(Probability FFTR Increase previous)* (Probability of a rate change) Probability of an increased FFER in the first and second meeting.Example probability are as follows: P(FFER unchanged)=Probability(FFER NoHike previous meeting)*(1-Probability of a rate change) P(FFER first increased on this meeting date,or decrease at second meeting if hike in the first meeting)=Probability(FFTR hike previous meeting)*(1-Probability of a rate change)+(Probability of a FFTR NoHike previous meeting)”(Probability of a rate change) P(FFER increased this meeting date as well as previous meeting date)=(Probability FFTR Increase previous meeting)*(Probability of a rate change) CME GROUP As the world’s leading derivatives,marketplace,CME GROUP is where the world comes to manages risk.Comprised of four exchanges-CME,CBOT,NYMEX,and COMEX-we offer the wide range of global benchmark products across all major asset classes, helping business everywhere mitigrate the myriad of risks they face in today’s uncertain global economy.