Questions tagged [inflation]

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Asset pricing based on stochastic inflation discounting (inflation controlled by stochastic state variable)

Suppose there is an asset that pays fixed nominal payout $\delta_t = \delta$, with a constant real discount rate $\bar{r}$ and stochastic inflation $\pi_t$. Suppose the price follows a controlled ...
66 views

A TIPS that matures in less than a month from now should trade like a treasury...Why can't I get the YTM's to match?

If a TIPS bond matures soon, lets say 4/15/24...we should know all the payments. I would think that if we calculate the YTM on that after adjusting for inflation it should have the same YTM as a 4/15/...
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Inflation Bond accrued inflation

Let's say an inflation bond has inflation adjusted coupons and nominal. With respect to dirty and clean price, is the accrued inflation of the nominal usually included in the clean quote? For example, ...
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Risk free rate for Black and Scholes model: Incorporating inflation?

I am new to quantitative finance and I am trying to create a model for option pricing. Naturally the Black and Scholes equation is front and center for this sort of thing, but that raises the question ...
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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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1 vote
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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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1 vote
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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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1 vote
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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 ...
145 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 ...
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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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174 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 ...
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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 ...
98 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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1 vote
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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?
1 vote
98 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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