Questions tagged [inflation]
The inflation tag has no usage guidance.
46
questions
3
votes
3answers
162 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? ...
0
votes
0answers
75 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 ...
1
vote
0answers
36 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 ...
3
votes
1answer
84 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 ...
2
votes
0answers
72 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?:
...
2
votes
0answers
85 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 ...
3
votes
0answers
60 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 $...
2
votes
1answer
78 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, ...
0
votes
0answers
31 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 ...
4
votes
1answer
78 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 ...
1
vote
1answer
65 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 ...
1
vote
1answer
49 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), ...
1
vote
2answers
103 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 ...
7
votes
2answers
202 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 ...
0
votes
2answers
115 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 (...
1
vote
1answer
412 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)=(...
0
votes
0answers
59 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 ...
1
vote
1answer
471 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 ...
0
votes
1answer
330 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 ...
0
votes
1answer
28 views
How can I measure wealth gain (loss) due to inequality?
As time passes, outside of inflation, the buying power of an individual changes relative to their peers wealth.
How can I measure the effect wealth inequality has relative to one's savings?
3
votes
1answer
178 views
Brazilian break even inflation curves
Brazil has had historically two sets of inflation bonds, the NTN-B and NTN-C series each with a different inflation index. The NTN-C is no longer issued.
When creating historical break even ...
0
votes
1answer
69 views
Measuring Medium-term Inflation expectations and real interest rate from OIS and Inflation Swaps
In this speech by Mario Draghi, in section '2:Responding to high unemployment', and subsection 'Boosting aggregate demand', Mario states «Over the month of August financial markets have indicated that ...
1
vote
2answers
1k views
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 ...
2
votes
2answers
165 views
Trading with Inflation, Unemployment, Trade Deficit Information
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 ...
2
votes
2answers
124 views
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 ...
3
votes
2answers
78 views
How do we include inflation in our calculations? [closed]
How do we include inflation in our compound interest calculations?
E.g. if we have current principal of 1000$ and the interest rate is 3% after 10 years we have <...
1
vote
1answer
460 views
How to get real interest rate from Nominal spot rates?
I have the nominal spot rates. Based on the Fisher equation , how to get the real interest rate ($r$) and the "expected inflation" ($\pi$) ?
2
votes
0answers
227 views
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 ...
4
votes
1answer
257 views
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 ...
1
vote
2answers
688 views
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 ...
2
votes
1answer
178 views
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, ...
1
vote
1answer
55 views
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 ...
1
vote
0answers
48 views
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)...
1
vote
0answers
93 views
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 ...
4
votes
0answers
126 views
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 ...
3
votes
1answer
299 views
Cross-Currency Inflation-Linked Swap
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?
3
votes
1answer
216 views
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 ...
1
vote
2answers
207 views
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 ...
1
vote
2answers
590 views
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) / (...
11
votes
1answer
698 views
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 ...
2
votes
1answer
353 views
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 ...
3
votes
2answers
972 views
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 ...
3
votes
1answer
82 views
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 ...
-5
votes
1answer
310 views
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 "...
2
votes
1answer
373 views
Risk Decomposition of Index linked Bonds
Do you know how to decompose the risk of index linked bonds?
To value a inflation linked bond, one plugs the real zero curve into the bond PV calculation, the real interest rate is as the fisher ...
3
votes
1answer
191 views
Do bond credit ratings suffer from “ratings inflation”?
A friend of mine who studies game theory suggested that credit ratings from the bond ratings agencies, such as Moody's, S&P, and Fitch, may suffer from a sort of "ratings inflation" similar to the ...
