10 votes
Accepted

Difference between 5Y breakeven inflation and 5Y5Y inflation forward?

I downvoted because I think the FED is very detailed in their documentation. The definition of a forward is a very basic financial question that a bit of google search can answer and not a quant ...
AKdemy's user avatar
  • 9,059
7 votes

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

This is in response to the part of your question that asks about M1 versus M2, although it seems you've more or less answered parts of your own question. M1 is the simplest monetary aggregate and ...
Sharad's user avatar
  • 1,181
6 votes
Accepted

Relationship between BBB credit spreads and rising interest rates

One explanation might be purely quantitative: The spread is to compensate for the present value (cost) of a possible future default. When interest rates rise all else equal, the discounted cost of ...
Mats Lind's user avatar
  • 1,352
5 votes

Inflation swaps rate vs. Break-even rate

Yes, you could call this a liquidity effect. The 10yr breakeven rate is defined as the difference between the nominal yield of the 10yr Treasury and the real yield of the 10yr TIPS. The TIPS has ...
dm63's user avatar
  • 16.9k
5 votes

Inflation Bond accrued inflation

Your URL provides the majority of the terms for these German linkers. I too had not come across them before but they seem identical to Canadian style (and now UK style) linkers with daily index ...
Attack68's user avatar
  • 9,939
4 votes
Accepted

Risk free rate for Black and Scholes model: Incorporating inflation?

I initially voted to close this question because I think asking about risk free rates is off topic on quant se (and answered several times). However, I do not think there is a good alternative where ...
AKdemy's user avatar
  • 9,059
3 votes

What is the impact of inflationary expectation on stock price?

Provided that it is always difficult to provide a unique answer to that problem in the stock market (it would be easier to answer it in the bond market instead, at least in my opinion), the simplest ...
Fr1's user avatar
  • 346
3 votes
Accepted

How does inflation impact stock returns? Academic examples

This is not peer reviewed, but it fits the bill and is one of my favorite pieces on this topic: Inflation in 2010 and Beyond. I also recommend Antii Ilmanen’s Expected Returns, which has an entire ...
Helin's user avatar
  • 11.6k
3 votes
Accepted

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) ... We know that CPI and inflation are kinda related. ...
Helin's user avatar
  • 11.6k
3 votes

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

Long ago, I built a good (IMHO) P&L-explain for Latin American inflation-linked bonds, which included usable C&RD. I hope the below ideas might help. In markets like Mexico, Chile, Colombia an ...
Dimitri Vulis's user avatar
3 votes

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

I saved a file, which has fitted 1-year real yield sampled at monthly frequency. It's my own calculation; feel free to use it. The best alternative sources for this kind of data tend to be bank ...
Helin's user avatar
  • 11.6k
3 votes
Accepted

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

I think the help desk would have been able to help. According to the DES page, FWISUS55 Index is simply ...
AKdemy's user avatar
  • 9,059
3 votes

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

Broadly speaking, if something is in M2 and not M1, it's because there's some friction in spending that money, while M1 allows for mostly frictionless transactions. M1 consists of currency in ...
Amaan M's user avatar
  • 133
3 votes
Accepted

Daily quotes TIPS (treasury inflation protected securities) data

I've done this exercise with BBG, so this is definitely possible. You can easily get a full list of CUSIPs (including matured ones) from TreasuryDirect and you can use the standard BDH function to get ...
Helin's user avatar
  • 11.6k
2 votes

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?

It's pretty much the same as a nominal bond, except cash flows need to be inflated. For example, here's the forward pricing formula for a Canadian-style linker, assuming one interim coupon payments: $...
Helin's user avatar
  • 11.6k
2 votes

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

You get a convexity adjustment from forward correlations only if you model separately the forwards and they are not perfectly correlated on the time interval $[0, T_1]$, as is the case in inflation ...
Antoine Conze's user avatar
2 votes

How to calculate interest rate in this problem?

you can also solve this by using the PMT function and goalseek in excel. The answer is as follows: What I did is, I first set the interest rate to 0% and calculated the monthly payment using the PMT ...
Liisi's user avatar
  • 21
2 votes
Accepted

How to calculate interest rate in this problem?

The annuity expression $a_{4}^{(12)}$is written as: $$a_{4}^{(12)}= \frac{1-(1+i)^{-4}}{i^{(12)}} = \frac{i}{i^{(12)}} a_4$$ where, $i$ is the effective annual rate of interest and $i^{(12)}$ is ...
Neeraj's user avatar
  • 2,228
2 votes

How to calculate interest rate in this problem?

There are 48 monthly payments. You can use the formula for the Present Value of an annuity: $12000 = 300 \frac{1}{i/12}[ 1-\frac{1}{(1+i/12)^{48}}]$ to find the interest rate However there is no ...
Alex C's user avatar
  • 9,372
2 votes

How to get real interest rate from Nominal spot rates?

There is a market for inflation linked government bonds (some countries e.g. US,CA,UK,FR,Germany,...). There are various prices quoted. The price with inflation lift (the inflation that has ...
Richi Wa's user avatar
  • 13.7k
2 votes

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

This is your chart superimposed on an inflation rate at 2% per annum (most central banks target inflation). This chart seems to represent (mindful of yearly volatility) the typical behaviour of an ...
Attack68's user avatar
  • 9,939
2 votes

Hull-White Calibration /Hypothetical Cap Pricing

First question I downvoted David answer because $f(0,0) \neq 0$ (generally speaking). And that's because it's the instantaneous forward rate at time $t=0$, that is $f(0,0) = f(0, 0, \Delta t)= r(0)$ ...
LePiddu's user avatar
  • 393
2 votes

Inflation Indexed Caplet/Floorlet

The formula above is usually the price for a year-on-year inflation indexed caplet, so the $\psi_i$ will be the day count fraction over periods $[T_{i-1},T_i]$ where these $i$'s index the year not the ...
BrownianBread's user avatar
2 votes

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

These are breakeven curves, you should make it clear that you are looking for the forward expectation of inflation, not observed inflation (i.e. not the CPI indexes). They are not normally published ...
william smith's user avatar
2 votes
Accepted

Calculating Implied Volatility from a put option

I’m not an expert on Inflation derivatives, so I will just give you an explanation on why your finder doesn’t yield any root. In the Black & Scholes framework, it holds for the price of European ...
ffbzona's user avatar
  • 358
2 votes
Accepted

House price inflation modelling

The standard approach here (as you probably know) would be to estimate a hedonic regression with a time-dummy. However, the problem you're facing (if I understand it correctly) is to estimate the ...
Sharad's user avatar
  • 1,181
2 votes

Breakeven Inflation Rate vs Actual Inflation Rate Study

I would compare the breakeven rate (yield of most recently issued nominal bond minus real yield of most recently issued TIPS) with the realized rate, with the latter determined as follows : $$ (...
dm63's user avatar
  • 16.9k
2 votes

How does FED quantify inflation expectation?

"How does FED qua[n]tify inflation expectation?" NY Fed survey, UoM survey, Philly Fed SPF, proprietary adjustments to breaks for various risk premia, etc. But overall, this question should ...
user42108's user avatar
  • 2,252
2 votes

Inflation β = 1 meaning a “perfect inflation hedge?”

You need to think of inflation as a macro factor in the cross-section of returns. What exactly is a good inflation hedge? $$ r_{i,t}-r_f = \alpha_i + \beta_\pi^i \epsilon_{\pi, t} + u_{i,t} $$ If $\...
phdstudent's user avatar
  • 8,061
1 vote

What is the impact of inflationary expectation on stock price?

Ok thanks for editing, now it is a bit more analytical and specific. I will still simplify for obvious reasons of space and time constraints. Let’s express D as net income * payout where payout is ...
Fr1's user avatar
  • 346

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