Questions tagged [inflation]
The inflation tag has no usage guidance.
84
questions
0
votes
1answer
86 views
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 ...
0
votes
0answers
38 views
Help with unexpected inflation beta?
I read an article here about unexpected inflation betas. The concept seems simple: regress nominal returns of an asset onto “unexpected inflation.” Then for every 1% rise in unexpected inflation, we ...
0
votes
1answer
59 views
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?
2
votes
0answers
38 views
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 ...
0
votes
0answers
37 views
What details must be considered when assessing an asset’s inflation beta?
The inflation beta of an asset is described as:
$$ r_{i,t}-r_f = \alpha_i + \beta_\pi^i \epsilon_{\pi, t} + u_{i,t} $$
For shorthand, I will use “return” to mean excess return.
In academic literature ...
0
votes
1answer
133 views
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 ...
2
votes
1answer
615 views
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 ...
0
votes
1answer
153 views
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 ...
0
votes
1answer
84 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 ...
0
votes
0answers
16 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 ...
0
votes
1answer
49 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 ...
0
votes
0answers
75 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 ...
0
votes
0answers
27 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 ...
0
votes
1answer
141 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 ...
1
vote
1answer
76 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 ...
3
votes
2answers
412 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 ...
0
votes
1answer
190 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 ...
0
votes
0answers
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 ...
0
votes
1answer
45 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 ...
0
votes
0answers
47 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
$$
1+ RR_{1-...
2
votes
0answers
61 views
Inflation Option Modelling Approaches
I am trying to come up with a simplistic inflation option model to get a sense of the materiality of some inflation-indexed contracts containing inflation guarantees. I have a stochastic nominal IR ...
2
votes
1answer
340 views
Which is the "correct" 5Y5Y Inflation Expectation on Bloomberg, and what are the differences?
When the market talks about 5Y5Y expectation, is it referring to FWISUS55 Index, or G0169 5Y5Y BLC2 Curncy on Bloomberg? I ...
0
votes
1answer
92 views
Where to Get the Yield of One Year Constant Duration TIPS ( inflation protected bonds)
Do you know where can I get the Yield of One Year Constant Duration TIPS ( inflation protected bonds). I found the yield of 5 year, but never could get the data for one year.
Many thanks!
1
vote
1answer
29 views
How to normalise companies relative to each other? Remove the effect of macro-economy?
I want to focus on companies-performance only and as much as possible remove the effect of macro-economy. Interest rate changes, crisis, inflation etc.
There are 2 goals:
Simplification of analysis ...
0
votes
1answer
212 views
What is the most convincing method/formula for carry and rolldown (in nominal terms) of inflation protected bonds
It is interesting that there is no thorough discussion and clear derivation on this per my search. I know TIPS are complex (compared to nominal bonds). The naive use of simple spot/forward yield ...
2
votes
2answers
140 views
Calculating Implied Volatility from a put option
I am trying to find the Black-Scholes implied vol from a put option. I know how to do this in the case of a regular put option on an underlier $S(t)$ where
$$ p(t, K) = e^{-r(T-t)}\mathbb{E}_Q\Big[ (K ...
0
votes
1answer
28 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 ...
1
vote
1answer
123 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 ...
3
votes
1answer
1k 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 ...
1
vote
0answers
25 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 ...
1
vote
1answer
59 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 ...
1
vote
1answer
107 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\...
0
votes
2answers
424 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,...
3
votes
0answers
136 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 ...
1
vote
2answers
308 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 + ...
1
vote
0answers
57 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?
1
vote
1answer
46 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?
0
votes
1answer
289 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?
3
votes
3answers
191 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? ...
1
vote
0answers
148 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
112 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
236 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
359 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
119 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
107 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
310 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
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 ...
4
votes
1answer
127 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
205 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
61 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), ...
