The most regularly traded structure in the inflation-linked swaps market, and particularly in the inter-dealer market, is the zero coupon inflation swap. One counterparty agrees to pay the cumulative percentage increase in the price index over the tenor of the swap (with some lag on the reference index, similar to cash securities), and the other pays a compounded fixed rate. … [Read more...]
Inflation Swap in Stock Market
An inflation swap is the linear form of an inflation derivative, an over-the-counter and exchange-traded derivatives that is used to transfer inflation risk from one counterparty to another. There are three main types of inflation swap. In a standard interbank inflation-linked swap, or zero-coupon inflation-linked swap, cash flow is exchanged on the maturity date. This swap … [Read more...]