Questions tagged [inflation]

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58 views

Breakeven Inflation Rate vs Actual Inflation Rate Study

I am relatively new to the realm of TIPS and inflation rate and am working on a study. I wish to investigate the correlation between the breakeven inflation rate for (5Y, 10Y, 20Y) TIPS and actual ...
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15 views

Inflation and growth due to inflation canceling out in cap rate formula?

A cap rate can be described as: K = RFRr + i + RPi + RPp – Gr – Gi + D Where K = cap rate RFRr is the real risk free rate, or index-linked bond i = average expected inflation RPi = the inflation risk ...
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1answer
45 views

Relation between inflation rate and the exchange rate of the currency

I have been studying the relation between exchange rates and the inflation of the currencies, but I am far from understanding the most relevant factor in driving FX market players from pricing ...
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68 views

Is the price of the following inflation derivative observed/traded?

Let $M_{t\to t+2}^{\\\$}$ be the pricing kernel (SDF) from period $t$ to $t+2$. Let inflation over period $t$ to $t+1$ be denoted by $\Pi_{t \to t+1}$. Is it possible to observe the following quantity ...
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22 views

ARMAX model with rolling window for predicting inflation

First of all, similar questions like mine are answered on this forum but I never quite saw an answer to this specific question. I'm trying to predict inflation by using an AR model with exogenous ...
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1answer
67 views

Why does holding a linker give you positive carry when inflation indices move up?

My book says: "By construction, the cash flows of inflation linked bonds are indexed, using daily indexation factors that are applied to the real price of a bond to arrive to the dirty price of ...
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1answer
65 views

House price inflation modelling

I have a data set of house prices and their corresponding features (rooms, meter squared, etc). An additional feature is the sold date of the house. The aim is to create a model that can estimate the ...
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2answers
251 views

What drives the difference between M1 & M2 money supply (in the US)?

From what I understand the only entity that controls M1 in US is the Federal Reserve. Is it true that M2-M1( M2 minus M1; the part of M2 that is NOT in M1 like timed deposits) is controlled by the ...
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1answer
86 views

IRR with Inflation Rate

I have cash inflows and cash outflows for a 7 year period and my MIRR and inflation rate. That's all the information I have. How do I calculation the IRR taking the inflation rate into account in ...
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4 views

How to adjust a cash transfer program's income requirements for inflation?

For a study, I would like to "estimate" the income requirements for a cash transfer program on 2018 based on information from 2015. This cash transfer program has two income lines that it ...
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1answer
31 views

Do all inflation swaps reference the non-seasonally-adjusted index values?

Inflation CPI values (typically published monthly except Australia) are typically published in both SA (sseaonally adjusted) and NSA (non-seasonally adjusted) variants. Inflation swaps reference the ...
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46 views

What are the differences between the two equations relating inflation, real interest rates and nominal interest rates?

My lecturer showed two equations to describe the relationship between inflation, nominal and real interest rates, denoted as $I, RN, RR$, respectively. Then we have the following equations $$ 1+ RR_{1-...
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53 views

Inflation Option Modelling Approaches

I am trying to come up with a simplistic inflation option model to get a sense of the materiality of some inflation-indexed contracts containing inflation guarantees. I have a stochastic nominal IR ...
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111 views

Which is the “correct” 5Y5Y Inflation Expectation on Bloomberg, and what are the differences?

When the market talks about 5Y5Y expectation, is it referring to FWISUS55 Index, or G0169 5Y5Y BLC2 Curncy on Bloomberg? I ...
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1answer
82 views

Where to Get the Yield of One Year Constant Duration TIPS ( inflation protected bonds)

Do you know where can I get the Yield of One Year Constant Duration TIPS ( inflation protected bonds). I found the yield of 5 year, but never could get the data for one year. Many thanks!
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1answer
27 views

How to normalise companies relative to each other? Remove the effect of macro-economy?

I want to focus on companies-performance only and as much as possible remove the effect of macro-economy. Interest rate changes, crisis, inflation etc. There are 2 goals: Simplification of analysis ...
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1answer
114 views

What is the most convincing method/formula for carry and rolldown (in nominal terms) of inflation protected bonds

It is interesting that there is no thorough discussion and clear derivation on this per my search. I know TIPS are complex (compared to nominal bonds). The naive use of simple spot/forward yield ...
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2answers
126 views

Calculating Implied Volatility from a put option

I am trying to find the Black-Scholes implied vol from a put option. I know how to do this in the case of a regular put option on an underlier $S(t)$ where $$ p(t, K) = e^{-r(T-t)}\mathbb{E}_Q\Big[ (K ...
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1answer
27 views

Looking for datasets with daily inflation rate for as many countries as possible

Here's an example of the kind of thing I'm looking for https://fred.stlouisfed.org/series/T10YIE I'm also happy to perform transformation on other data to get an estimated/approximated daily value if ...
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1answer
83 views

How to evaluate embedded floor option in inflation linked bonds if interbank inflation floor instruments cannot be used or do not exist

Suppose we consider simple case that only par is protected against base price index, so it is with zero coupon floor feature. How do we value this option given that there is no inflation floor ...
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20 views

Jarrow-Yildrim like model with G2++

I would be interested in if there exists a Jarrow-Yildrim like model, but based on two factors like the G2++ model. If there is no particular description available yet, would it be possible to extend ...
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1answer
702 views

Inflation swaps rate vs. Break-even rate

Can someone explain me the difference between zero coupon inflation swap rate and breakeven rate? For example, currently, US 10y zero coupon inflation swap rate is about 1.4%, while US breakeven 10y ...
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24 views

How could we use 5 year Tips minus 2 Year Tips to get insight of Inflation Expection?

I read a article where the author used the difference the between yields of 5 year Tips and 2 year Tips as a proxy of the inflation expectation. Could anyone explain me what is the logic behind this ...
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1answer
47 views

How to deflate USD inflation?

On the picture below prices of SP500 and Gold (rescaled) for last 90 years. There are at least 3 types of distortions caused by inflation: Slow upward trend. Sudden jumps caused by radical changes ...
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1answer
85 views

Inflation Indexed Caplet/Floorlet

Can someone explain what is it with $\psi_{i}$ (year fraction in $[T_{i-1},T_{i}]$). The formula in Mercurio (2006) as is follows: $N\psi_{i}P_{n}(t,T_{i})\mathbb{E}_{n}^{T_{i}}\left[\left(\omega\...
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2answers
318 views

Hull-White Calibration /Hypothetical Cap Pricing

I have a question regarding calibrating Hull-White (Extended Vasicek) Model to bond data. As you know, and stated in Mercurio (2005), zero coupon bond price in the Hull and White (1994); $P(t,T)=A(t,...
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0answers
121 views

Looking for a Paper: RBS Guide to Inflation-Linked Products

I wonder if any of you have an access to "The Royal Bank of Scotland (2003) Guide to Inflation-Linked Products. Risk." paper. It was in the bibliography of Mercurio's "Pricing Inflation Indexed ...
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2answers
211 views

Why Consumer Price Index is linear, when it should be exponential? And what to use instead?

Consumer Price Index looks like a very nice straight line, perfectly approximated with linear function (considering it only after the 1972). $$cpi(years) = start + ...
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0answers
44 views

Inflation TIPS - What does it mean - 10Y breakeven shorts with 0.8 beta?

"10Y breakeven shorts with 0.8 beta" "10Y breakeven shorts with long 80% nominal to eliminate long duration bias" Are the above two the same, what do they mean?
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1answer
39 views

In a cleared inflation swap agreement, what determines how much “collateral” a party needs to deposit into the third party escrow account?

Does realized inflation or expected future inflation determine how much money needs to be placed into the escrow account each day?
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1answer
264 views

What happens to both sides of an inflation swap agreement if there is deflation?

If there is deflation does the Inflation receiver not only pay the fixed leg but also receives a reduced CPI? I.e. does he lose twice?
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3answers
184 views

Can an individual hedge inflation that exceeds CPI-U?

Is there a way for an individual (i.e., excluding institutional tools and using only consumer products) in the U.S. to hedge inflation over the long term greater than that measured by CPI-U? ...
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135 views

“BTP ITALIA” Inflation Linker Pricing

I have some issue with pricing of Italian linker bonds (http://www.dt.tesoro.it/export/sites/sitodt/modules/documenti_en/debito_pubblico/titoli_di_stato/BTP_Italia.pdf) . The issue is their specific ...
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0answers
93 views

How to apply multiplicative price seasonality to bond prices in quantlib?

Can someone please give a brief or any link which explains how to apply multiplicative price seasonality to inflation linked bonds in Quantlib using python modules. Have gone through most of the ...
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1answer
180 views

how to simplify Inflation year-on-year option to Zero-coupon option

Belgrade 2004 paper basically proposes that inflation year-on-year volatilities (and hence yoy options) are basically the spread vols between the Zero-coupon vols from (t0 to T) minus the zero-coupon ...
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298 views

How to build an inflation term structure in QuantLib?

This is what I've got, but I'm getting weird results. Can you spot an error?: ...
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0answers
109 views

Understanding the link between inflation and credit spreads

I found a paper which uses inflation as an independant variable for credit spread. Unfortunately, the relationship is not explained in this paper. Further research got my to the paper of Kang/Pflueger ...
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0answers
92 views

Jarrow-Yildirim $\sigma_I$

Under the Jarrow-Yildirim model, the nominal short rate $r_n$, the real rate $r_r$ and index $I$ are modelled according to the following stochastic differential equations under the Martingale measure $...
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1answer
295 views

Where can I get some Inflation Option example quotes (year-on-year and zero-coupon)

I am writing an academic paper on calibration of inflation vanilla options. I need to generate examples for the paper. Is there anywhere I can get example data for the Inflation year-on-year options, ...
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41 views

Inflation of Bitcoins

https://www.google.com/amp/s/www.coindesk.com/bitcoins-next-halving-rally-coming-soon-in-2019%3famp suggests that the inflation rate of Bitcoins is around 4 percent. Considering the fact that ...
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1answer
121 views

Consumer Price Index (CPI) Inflation Impact on Price of Securities

I was wondering if there are any papers on CPI announcements' impact on the price of certain securities that are tied to inflation rates. I know there are derivatives for inflation rate, but I was ...
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1answer
140 views

Inflation Lag Bond Valuation

Question: On 1st March 2006 a government issued a large tranche of an index-linked bond having a term of 6 years. Coupons of 4% p.a. were payable half-yearly in arrears and the bond was redeemed at ...
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1answer
59 views

How does inflation impact stock returns? Academic examples

For a literature survey in my university class, I have been asked the question "How does inflation impact stock returns?". After reading some informal articles (in periodicals/ the general internet), ...
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2answers
131 views

What is the impact of inflationary expectation on stock price?

It is well known that, at least theoretically, stock prices are expected to rise in an inflationary environment. Now, my question is that does the same go for inflationary expectations; for example if ...
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2answers
449 views

Relationship between BBB credit spreads and rising interest rates

A stylized fact in markets seems to be that there is a negative correlation between interest rates and corporate spreads - as interest rates rise, spreads tend to tighten and vice versa. I'm ...
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2answers
150 views

Data for daily real interest rates

In a high frequency model i would like to add daily real interest rates (preferably short-term) as a variable. However, I cannot seem to find either daily CPI data, or daily real interest rates (...
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1answer
715 views

What is the formula for the forward price of a inflation linked bond assuming there are coupons in the interim period and the deal is collateralised?

t2=forward settlement date P=Spot clean price AI0=Spot accrued interest r=repo rate t1=coupon payment date AIt2= accrued interest of the forward settlement date t0= now Proceeds Method: F(t2)=(...
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64 views

Does MV of IRS depend on inflation?

Question: At time=0 company A enters an 3y interest rate swap with a bank, where A recieves floating and pays fixed. After 1y, at t=1, the inflation changes from 1% to 3% does this affect the MV of ...
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1answer
722 views

convexity adjustment in YOY inflation swap , compared with TRS, and considering autocorrelation

a YOY inflation swaplet payoff is S2/S1 - 1 , where Si is the CPI at time i and a TRS (total return swaplet) asset leg payoff is also the same except the underlying is an asset. So it seems to me ...
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1answer
491 views

Pricing models for inflation-linked bonds?

I need to price an inflation-linked bond issued by italian government. Which models are indicated for this bond? I think I can price bond as a FRN plus an option on inflation rate. But, first ...