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I am trying to create a model for inflation for trading purposes. In his book The Market: Practice and Policy S. Nickell presents a model that relates unemployment, inflation and trade deficit. His ...
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What is the “inflation delta” of an option?

I'm preparing a report on the different Greeks used in risk measurement, and my boss mentioned the inflation delta within the first-order Greeks (and the Inflation Vega, but I guess that if I figure ...
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How to calculate interest rate in this problem?

Problem: A loan of £12,000 is issued and is repaid in instalments of £300 at the end of each month for 4 years. Calculate the effective annual rate of interest for this loan. What I tried- But ...
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CVA for an inflation linked swap

I am trying to value an inflation linked swap and wish to calculate the associated CVA and DVA. I think the best way to approach this would be via a simulation. Suppose I wish to calculate CVA over ...
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How do you deal with Inflation lag in a MC simulation?

Consider the UK RPI index. This index is published every month around the 15th (give or take a few days). The publication refers to the RPI index of the month before, so there is a lag of a few weeks ...
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Calculate single cashflow at maturity for a Total Return Inflation swap (zero coupon)

I'm a newbie to the world of swaps. If I have a Total Return Inflation Swap (Receive CPI, Pay Fixed Zero Coupon) Based on CPI Index starting level = 236 Notional = 100,000 Term = 5 Years How can I ...
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Is printing money really a bad thing?

I have 2 related questions about increasing money supply: (I know high school level economics.) 1) In an economy which has low growth and deflation, is it at all a bad thing to print money? In fact, ...
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Cause of long term inflation in the United States [closed]

Does the US government have a policy of printing money? If so what is this number called, who decides what it is, and where can I find it? If not what is the cause of our long term inflation? (I'm ...
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Index tracker and inflation

I'm trying to get my head around how inflation really affects index trackers. I've been looking at this question, but somehow misses the point I want (How To Account For Inflation Over Historical Data)...
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Pricing inflation lags

I've been looking into a short piece of maths I found on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding was correct or if the maths isn't quite ...
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Inflation/Rates Correlation

I've been looking into a short piece of maths a colleague has written on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding is correct, or if my ...
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I am trying to find any references to cross-currency inflation-linked swaps. Have anyone encountered them and can describe how they work and how they differ from standard year on year inflation swaps?
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How can I break down the change in value for an inflation-linked bond

I am trying to decompose the change in value of an inflation-linked bond into two constituent parts: 1) That due to changing nominal rates on the issuer's non-linked bonds 2) That due to changing ...
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Probability of Hyperinflation as a function of Probability of Soverign Default

I'm looking for some academic research on modeling risk of hyperinflation. Specifically, I'm interested in modeling the probability of hyperinflation over some time interval (e.g., probability of ...
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How To Account For Inflation Over Historical Data

I believe inflation is greatly affecting my sample data, even when using percent-changes for movements. I have read this post, which recommends the formula ((Current-Base Year CPI) * Price) / (...
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Inflation modelling

I am trying to price an option on the Spanish CPI. The option is a European call with a single observation date. However, I am fairly new to inflation modelling, so there are two areas in which I ...
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Inflation swap liquidity versus inflation-linked bonds

In which markets are inflation swaps considered liquid enough to be the primary instrument for measuring market inflation expectations (compared to say, inflation-linked bonds)? Are there specific ...
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How to calculate discounted inflation and growth?

Given the nominal bond yield and the inflation index bond yield (earning yield), how would one calculate the discounted inflation rate (discounted earning growth rates)? These two factor seems to ...
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Accounting for Withdrawals

I am trying to wrap my head around the proper way to do this. I would like to simulate the portfolio value adjusted for inflation with a fixed withdrawal rate. To simulate withdrawal rate, I will ...
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inflation > interest rate? [closed]

Currently, the federal reserve interest rate is 0-0.25%, and the inflation is 2-3%. Does this contradict the no-arbitrage principle? (The arbitrage being: borrow money at 0.25% and invest it in the "...