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?

  • $\begingroup$ In some Latin American countries that have had high inflation in the past, they use 'inflation-adjusted' currencies alongside the nominal ones, e.g. in Mexico they have MXV along with MXN; in Colombia, COU along with COP; in Chile, CLF along with CLP. You can get broker quotes (e.g. from ICAP) for swapping fixed MXV (i.e. MXN adjusted for inflation) v USD Libor. $\endgroup$ – Dimitri Vulis Apr 20 at 4:23

This is likely to be a marginal product that exposes the investor to the delta between reference baskets. For example, trading EMU HICP vs UK CPI, and the basket different may be a greater weighting on food etc.

The bank writing these instruments could easily hedge the risk. There is opportunity for sizeable bets.

Have not come across any media or other references, would be interested to see...


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