Year-on-Year Inflation-Indexed Swap
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The Year-on-Year Inﬂation-Indexed Swap (YYIIS) ia a standard derivative product over Inflation rate. The underlying asset is a single Consumer price index (CPI).
It is called Swap because each year there is a swap of a ﬁxed amount against a ﬂoating amount. But in reality only a one way payment is made (ﬁxed amount - ﬂoating amount).
Detailed flows
- Each year, at time
- Party B pays Party A the ﬁxed amount
- Party A pays Party B the ﬂoating amount
where:
- K is the contract ﬁxed rate
- N the contract nominal value
- M the number of years corresponding to the deal maturity
- i the number of years (0 < i <= M)
- is the ﬁxed-leg year fractions for the interval [Ti−1, Ti]
- is the ﬂoating-leg year fractions for the interval [Ti−1, Ti]
- is the start date
- is the time of the flow i
- is the maturity date (end of the swap)
- is the inflation at start date (time )
- is the inflation at time of the flow i (time )
- is the inflation at maturity date (time )
See also
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