Inflation swap: Difference between revisions
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==See also== | ==See also== | ||
*[[Consumer Prices Index]] | *[[Consumer Prices Index]] (CPI) | ||
*[[CPI swap]] | |||
*[[Flexible inflation targeting]] | |||
*[[Inflation]] | *[[Inflation]] | ||
*[[Inflation risk]] | |||
*[[Inflation target]] | |||
*[[Longevity swap]] | *[[Longevity swap]] | ||
*[[Notional principal]] | *[[Notional principal]] | ||
*[[Principal]] | *[[Principal]] | ||
*[[Swap]] | *[[Swap]] | ||
*[[Treasury inflation-indexed securities]] | |||
[[Category:The_business_context]] | [[Category:The_business_context]] | ||
[[Category:Financial_products_and_markets]] | [[Category:Financial_products_and_markets]] | ||
Revision as of 03:14, 19 June 2023
Risk management and pensions risk management.
An inflation swap is a contract used to transfer inflation risk from one party to another through an exchange of cash flows.
One party pays a fixed rate cash flow on a notional principal amount.
The other party pays a floating rate linked to an inflation index, such as the Consumer Prices Index (CPI).
The party paying the floating rate pays the inflation adjusted rate multiplied by the notional principal amount.
Usually, the principal does not change hands.
Inflation swap prices provide an estimate of what the market considers to be the expected future inflation rate.
