I E U.S. TREASURY OND INDEX SERIES™ ALULATION METHODOLOGY - ICE

ICE U.S. TREASURY BOND INDEX SERIESTM CALCULATION METHODOLOGY

March 7, 2019

Table of Contents

1. Introduction...............................................................................................................................................................3 2. Index Calculations......................................................................................................................................................3

2.1 Constituent Returns: ...........................................................................................................................................3 3. Index Level Calculations.............................................................................................................................................4

3.1 Index Returns: .....................................................................................................................................................4 3.2 Index Level Analytic and Summary Measure Calculations: .................................................................................5 4. Index Leveraged Calculations ....................................................................................................................................6 4.1 Daily Leveraged Return .......................................................................................................................................6 4.2 Leveraged Index Value ........................................................................................................................................6 4.3 Inverse reference Index value .............................................................................................................................6 5. Currency Return.........................................................................................................................................................7 5.1 Daily Index Currency Return/ISO.........................................................................................................................7 5.2 Daily Index Converted Total Return/ISO .............................................................................................................7 5.3 Accuracy ..............................................................................................................................................................8 6. Disclaimer ..................................................................................................................................................................8

1. Introduction

ICE Data Indices, LLC (IDI) follows established calculation principles. This document outlines (A) the calculation principles generally applied to ICE U.S. Treasury Bond Index Series and (B) the bond and index level analytics published by IDI.

2. Index Calculations

Returns and risk measures such as yield duration are first calculated at the Constituent level and then aggregated to the Index level using their market weights.

2.1 Constituent Returns:

Let amounts 0, 0, 0, 0 , 0 and 1 1, 1, 1 , 1 denote the price, accrued interest, par amount, cumulative coupon payments and market values at date 0 and date 1, respectively. Let denote the coupon payments during the period (excluding any coupon payment on date 0 but including any coupon payment on date 1). Then coupon payments during the period: = 1 - 0

The market values at time 0 and 1, are: 0 = 0 ? [(0 + 0) + 0] and 1 = 1 ? [(1 + 1) + 1]

The price return 1 , coupon return 1and factor return 1 (whenever applicable) are defined as follows.

Price Return: Return due to price appreciation over the return period.

1

=

1 (0

- 0 + 0)

Coupon Return: Return due to coupon accrual during the period.

1

=

(1 - 0) + (0 + 0)

Factor Return: Return due to inflation factor (Inflation Linked Securities)/paydown factor (MBS, Municipals and Private Placement securities with early principal payment) during the return period.

Where,

1

=

[

-

(1 + 1)] (1 (0 + 0)

-

1/0)

is the redemption price. = 0 for inflation linked security and = 100 for other asset types.

 0and 1are factors for dates 0 and 1, respectively. For inflation linked security (TIPS), they are inflation ratios for dates 0 and 1, respectively. For mortgage backed security (MBS), they are paydown factors , the outstanding principals as a fraction of the original outstanding principal, for dates 0 and 1. For municipal bond or private placement security, they are the outstanding principal amounts for dates 0 and 1.

Total return: The sum of price return, coupon return and factor return. 1 = 1 + 1 + 1

3. Index Level Calculations

3.1 Index Returns:

Index returns are calculated by aggregating the Constituent level returns using market weights. To calculate Index return for the period from dates 0 and 1, market value weights at date 0are used. The total market value of the Index at time 0 is 0 plus any intra-month cash from coupon payment or principal repayment and the weight for constituent security.

0 = 0/ ( + 0)

3.1.1 Cumulative Index Price Return:

-1

+

(1

+

100

-1)

?

-1 = - 1 -1 = - 1 =

3.1.2 Cumulative Index Income Return

-1

+

(1

+

100

-1)

?

-1 = - 1

-1 = - 1

=

3.1.3 Cumulative Index Factor Return

-1

+

(1

+

100

-1)

?

 -1 = - 1 -1 = - 1 =

3.1.4 Cumulative Index Total Return + +

= = =

3.2 Index Level Analytic and Summary Measure Calculations:

Constituent level analytic measures such as yield, duration, convexity, option adjusted spread are market weighted to the Index Level.

=

where Constituent Weight is defined as:

=

and the Subtotal of the Constituent Market Value is calculated as:

= +

However, Weighted Average Coupon of the Index is par weighted as follows:

=

where the Subtotal of the Constituent Par Amount is calculated as:

= +

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