Questions tagged [inflation]
The inflation tag has no usage guidance.
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Derive the convexity adjustment for inflation YoY swap with unconventional payoff
I'm trying to solve for the convexity adjustment for an inflation YoY swap with unconventional payoff, where $I_i$ is CPI at time i:
$Notional * ([I_i/I_{i-1}]^{Day Count Fraction} - 1)$
In the normal ...
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Where can I find UK Gilt derived break even inflation rates? [duplicate]
The St Louis Fed publish data like this, https://fred.stlouisfed.org/series/T10YIE where the break even inflation rate is derived from treasuries and TIPS. Is there equivalent data derived from UK ...
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Nominal vs. real (inflation-adjusted) prices/returns in cross-sectional asset pricing
I have the impression that asset pricing models such as the CAPM or Fama & French 3 factor model typically concern nominal rather than real (inflation-adjusted) prices/returns. If this is indeed ...
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Seasonality adjustment within Quantlib Zero Coupon Inflation Swap
I am currently working on pricing a Zero Coupon Inflation Swap using Quantlib in Python. During my analysis, I have observed that when the start date and end date of the swap coincide exactly with X ...
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YYIIS Inflation swap chapter 16 of Brigo's text
Are there errata in the Brigos's text of Interest Rate Models in chapter 16 when it is defined the YYIIS payoff? In formula (16.3) is defined Party A's payoff as:
\begin{align}
\\
N\psi_i\left[\frac{I\...
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Daily quotes TIPS (treasury inflation protected securities) data
I am looking for historical quotes for US TIPS (treasury inflation protection security). What is a reliable source of data to get this information?
Here's what I have tried:
I have looked into this ...
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Risk mapping for Brazilian IPCA bonds [closed]
On Jorion's 'Value at Risk' chapter about risk mapping, interest rate swaps are decomposed in a portfolio of forward contracts so they can be mapped into risk factors.
I'm trying to implement this for ...
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Inflation in wealth forecast [closed]
I am building a model to simulate people's wealth in the next years.
Say Mr X has a portfolio with an expected return of 3% (annual). From this I can simulate the return of his portfolio in the next ...
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Expectations on real interest rates in China
How do market practitioners approach expectations of real interest rates in China?
For the US we would look at inflation-linked bonds and surveys, but what about China?
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Data on historical, cross-country REAL yield curves (i.e. inflation-linked bonds)
I asked here about data on a data source for historical yield curves for many countries. Many central banks (linked there, in Helin's answer) publish estimates for their nominal yield curves.
But most ...
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Quantlib : Valuation of inflation swaps of EUR-RPI using quantlib python?
Below is the sample code to compute the inflation swaps. I have referred the Quantlib cookbook to get the flavor of Inflation swaps. But I feel that the term structure and final NPV is not accurate ...
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Up-to-date breakeven inflation term structure for US and Eurozone
I am looking for openly accessible, up-to-date data for the term structure of the breakeven inflation rates in the US and the eurozone. All I can find are static charts that illustrate past news ...
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144
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How does FED quantify inflation expectation?
As I understand the FED considers the employment and inflation expectation when defining the monetary policy. I wonder what is the quantitative indicator or traded instrument FED uses to derive this ...
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Long Breakeven inflation
I want to go long bei by going long individual 10 year tips and short individual 10 year treasuries. How do I calculate and match the duration?
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Should I train (and apply) a commodity forecasting model using nominal or real historical (futures) prices?
I am forecasting hourly power prices by applying Gradient Boosting to, among other variables, average monthly gas prices. The algorithm is currently trained on historical nominal monthly average gas ...
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Inflation β = 1 meaning a “perfect inflation hedge?”
I read somewhere (Ang, Brière, Signori: Inflation and Individual Equities, 2012) that in a given period if the inflation rate rises by 1% point (say from 1% to 2%), and the return of Asset A rises ...
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Difference between 5Y breakeven inflation and 5Y5Y inflation forward?
I cannot figure out the difference between the two data series found here:
https://fred.stlouisfed.org/series/T5YIE/
https://fred.stlouisfed.org/series/T5YIFR/
The 5Y breakeven inflation, to my ...
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Why does the rate of inflation vary over time?
Interest rates have varied significantly over the last 50+ years (source: https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart ).
Is it possible to comprehensively and succinctly ...
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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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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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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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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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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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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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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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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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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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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
$$
1+ RR_{1-...
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Inflation Option Modelling Approaches
I am trying to come up with a simplistic inflation option model to get a sense of the materiality of some inflation-indexed contracts containing inflation guarantees. I have a stochastic nominal IR ...
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Which is the "correct" 5Y5Y Inflation Expectation on Bloomberg, and what are the differences?
When the market talks about 5Y5Y expectation, is it referring to FWISUS55 Index, or G0169 5Y5Y BLC2 Curncy on Bloomberg? I ...
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Where to Get the Yield of One Year Constant Duration TIPS ( inflation protected bonds)
Do you know where can I get the Yield of One Year Constant Duration TIPS ( inflation protected bonds). I found the yield of 5 year, but never could get the data for one year.
Many thanks!
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How to normalise companies relative to each other? Remove the effect of macro-economy?
I want to focus on companies-performance only and as much as possible remove the effect of macro-economy. Interest rate changes, crisis, inflation etc.
There are 2 goals:
Simplification of analysis ...
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What is the most convincing method/formula for carry and rolldown (in nominal terms) of inflation protected bonds
It is interesting that there is no thorough discussion and clear derivation on this per my search. I know TIPS are complex (compared to nominal bonds). The naive use of simple spot/forward yield ...
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Calculating Implied Volatility from a put option
I am trying to find the Black-Scholes implied vol from a put option. I know how to do this in the case of a regular put option on an underlier $S(t)$ where
$$ p(t, K) = e^{-r(T-t)}\mathbb{E}_Q\Big[ (K ...
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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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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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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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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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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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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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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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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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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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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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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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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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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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"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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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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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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